We live in a service economy. The service industry has overtaken manufacturing and agriculture to become the world's fastest growing leader. In most countries, this sector represents around 60% of GDP and is the one that contributes the most to wealth creation and job creation.
Additionally, many companies that sell products increasingly use services to differentiate and add value to their offering. However, there is still a high level of general dissatisfaction with the quality of services, whether public or private, and managers have very few tools that allow them to design innovative services that improve customer satisfaction and loyalty for increase the profitability of your organizations.
While services have become a dominant economic force around the world, business, government, and academia are still not investing enough resources in research and development (R&D) for services so that growth can be reflected in the economy. At a time when customers are demanding more value and shareholders more profitability, companies must learn to innovate in services to stay competitive. Without innovation in services, the gap between customer demands and the ability of companies to satisfy them will widen, which can become a serious economic and competitive threat for many companies.
The few companies that innovate in services generally base their efforts to design and market new services on methods that were created for product development and manufacturing. This can be counterproductive, as services have unique characteristics that make them different from products:
- They are intangible, they cannot be seen before buying or taking them home. The act of producing services is inseparable from their consumption. Unlike tangible products, no service experience is the same as another. Services cannot be inventoried.
As a result of these differences, many methods that are suitable for product development have limited applicability for innovating services.
In recent years, some pioneering companies have developed specific tools to innovate in services. These tools allow companies to better understand customer needs, map the service experience, design the service experience, and prototype new, more innovative services. Managers are becoming aware that service innovation is a critical business process that cannot be left to chance, but must be managed to develop innovative services that improve customer satisfaction and increase the profitability of their companies.
What exactly does it mean to innovate in services?
Innovation in services is a new discipline that seeks to innovate in activities that do not end in the purchase of a physical or tangible product, but in activities or benefits that are intangible or do not result in the possession of something, such as cutting off the hair, eating at a restaurant, buying insurance, going to the doctor, etc. Innovating in services then means improving the experience that a customer has with a company or a brand, and how to design that service to make it more tangible in the eyes of the customer.
To better understand what it means to innovate in services, let's look at some examples that we have collected from various parts of the Starbucks world: Starbucks coffee shops have redefined the experience of having a coffee to the point that many people are willing to pay between $ 2 and $ 5 dollars to have a coffee at Starbucks, which would only cost them $ 0.75 elsewhere. Starbucks coffee, although of good quality, does not outperform other coffees in blind tasting tests, which means that people visit Starbucks, more than for their coffee, for the quality of the experience they live in their stores.. Many customers have even said that they consider Starbucks coffee shops as their “third place”, after home and work, a place where they can relax away from the pressure of the boss and family. In fact,80% of Starbucks sales come from people who visit its stores 20 days a month, which shows the level of loyalty that customers have with this brand.
Virgin Atlantic: Virgin Atlantic airline, owned by tycoon Richard Branson, has earned a reputation for being the company that consistently raises the bar on the quality of airline service. The company, for example, has innovated by focusing on the total customer experience, so that it picks up at home, with a limousine, the executives who travel with the company and transports them, when they arrive at the airport of their final destination, to the hotel or office where they are going. Additionally, the company redesigned passenger check-in at London Heathrow Airport, so that a passenger traveling with Virgin Atlantic takes between 5 to 10 minutes from entering the airport until entering the VIP boarding lounge. of the company. As analysts say,"Virgin Atlantic does for its customers what its competitors could not accomplish even in their wildest dreams."
Progressive Insurance: Progressive Insurance insurance company has innovated in the experience of using car insurance. For example, if you have an accident on a highway and have Progressive Insurance insurance, the company will send you a Van that will assist you in any need you may have (Vans have cell phones, coffee and soda station and a place so that the client feels safe). While you are safe in the Van, a Progressive Insurance agent will inspect your car accident using a laptop computer (PDA). The agent will then return to the car to print, wirelessly and on the spot, a check for the amount of damage to your car for you to repair at the shop of your choice.
Progressive Insurance has redefined what one can expect from an insurance company.
Geek Squad: Geek Squad, a computer support company, redefined the experience of having a broken computer. Geek Squad or "Nerds Squad" is a company that transformed the computer repair service, turning from a boring and frustrating event, into a live event, with theater, drama and excitement. The company's promise is: "We rescue lost files, with the efficiency of a Swat team." Geek Squad techs wear a police outfit and cars like Swat gear that make calling them an experience. Geek Squad was bought by Best Buy, which expected to earn $ 650 million in revenue in its first year after acquisition.
Netflix: Netflix is a video rental company that redefined the experience of renting a video to watch at home. The company was born after seeing the frustration felt by the clients of the famous video rental company Blockbuster, when they had to pay fines for the late delivery of a film. Netflix knew that most of Blockbuster's revenue came from late-delivery penalties rather than from renting the movies itself. Netflix designed a video rental service that eliminates late-delivery penalties and allows customers to watch movies for as long as they want without additional charges.The company uses the Internet to offer a significantly greater variety of films than its competitors, and uses the United States mail system for customers to receive and return films. Netflix has made Blockbuster's traditional rental model obsolete and is outperforming Blockbuter in results even though the company does not have a physical movie store.
Toyota Rent a Car: In 2009 the tourism industry in Costa Rica experienced a significant drop in sales due to the international financial crisis. This crisis also affected the tourist car rental industry, which had become a “commodity”. In other words, for the client it was the same to rent a “compact car” or a “4 × 4” from any company, as long as they obtained the lowest price.
Toyota Rent a Car developed an innovative strategy within its strategic planning process to differentiate itself from its competitors and take the customer experience to the next level. Additionally, the company is implementing a process to systematically manage innovation in order to constantly add value to its services to maintain its competitive advantage. These measures have allowed the company to charge a higher price than its competitors, which its customers are willing to pay for the quality of service they receive. Innovation in services: the leap to the next level.
Innovation in services has become such an issue that companies like IBM, Oracle and others have come together to create the Center for Research and Innovation in Services (SRI), to lead the way. development of tools and methodologies to innovate in services.
"People have a good idea of what it means to innovate in technology," says Jim Spohrer, director of Services Research at IBM. "But innovation in services is more hidden."
However, the fact that the phrase is being spread as something new does not imply that the concept is also new. Spohrer proposes the example of the electric light bulb: “People know the story behind Thomas Edison's invention and immediately visualize the light bulb, but we rarely think of the service innovation that was necessary to massify the invention, such as the introduction of light bulbs. in the houses and defining the prices to keep them on. All this is innovation in services ”.
Linked to the rise of innovation in services, we have observed a growing wave of models that seek to outline the process and obtain results in the short term for organizations. Among the most prominent are service science and service design, the foundations of which we will discuss below.
Service Science
Innovation in services has become so important that today there is talk of a totally new discipline that has been called the “Science of Services”. This new academic discipline would come to unify the work of the most consolidated areas such as computer engineering, operations research, industrial engineering, management sciences and social and legal sciences, with the purpose of developing the necessary skills to succeed. in an economy based on services and knowledge.
Service Design
As already mentioned, the service sector is growing both in terms of staff employed and in importance within the world economy, at the same time that the manufacturing sector is declining.
Recently, managers in organizations involved in the renewed sector began to notice that a conscious effort in applying design techniques to services can result in enormous customer satisfaction, greater control over their offering and higher profits.
Consequently, as with manufactured products, services must also be designed and this design needs to be managed.
Now, service design must be both tangible and intangible. It can involve artifacts and other aspects including communication, environment, and behaviors. Whatever form it takes must be consistent, easy to use, and strategically applied.
However, many top service business managers still do not seem aware of the benefits that design can bring to their offering and, as a result, many organizations are operating at a suboptimal level. That is why recently several consulting firms (including Live-Work, Engine and Innovare) have turned their attention to service design and are offering support and consulting to the general community.
Innovate in Customer Experience
Today, providing good customer service is no longer an element that gives a company a competitive advantage. Good customer service is the minimum price that a company must pay to enter a market to compete. Companies that want to innovate to differentiate themselves from their competitors every day talk more about innovating in the customer experience. In fact, innovating in services is creating value in the customer experience.
Innovation in customer experience is a relatively new term with a number of different interpretations in the market. However, our definition is quite simple. Every time a company interacts with a customer, the customer has an experience with the company that can strengthen or weaken the future relationship and the customer's desire to come back, spend more, and recommend the company. The innovation consultants in the services identify each of these "moments of truth" and make sure that the company, its collaborators, products, processes, technologies and culture are aligned with all these points of contact, to satisfy in the best way possible to the customer based on what is most important and valuable to them and to create memorable moments that add value to the brand.
In fact, at Innovare we love to use the following formula, which indicates that a customer's satisfaction with a brand will be equal to the sum of the customer's experience at all the points of contact they have with that brand over time, where at each point the customer will have expectations of the brand and will compare them with the experience they receive from the brand.
This concept goes beyond traditional approaches to improving customer service, which focus only on the most superficial aspects of customer interaction (smiling, answering the phone quickly, being friendly, etc.), addressing the problem in a comprehensive and considering all the processes, human talent, culture and information technologies that influence the total customer experience.
Promises versus Reality
Ironically, most companies spend fortunes on marketing and advertising to promote their "brand promise" in front of customers prior to purchase. But few companies invest the time and resources to ensure that the brand promise is conveyed, effectively, at all touchpoints where the company interacts with the customer, and that the promise is adopted internally by all staff. A company must "operationalize" the brand, by turning the brand promise into a reality and by instilling in employees trust and identification with the brand and the company they represent.
We know that companies need effective advertising and marketing campaigns to attract customers. Once this is achieved, the future of the consumer relationship will be based solely on the quality of that Customer Experience. It is easy to make promises. It is much more difficult to fulfill them. Customer experience innovation ensures that brand promise is consistently and flawlessly exceeded, in every moment of truth.
Remember: the best advertisement is your service. Businesses grow profitably by creating valuable and positive experiences for their customers, not through aggressive and costly marketing and advertising campaigns. Recent research proves that we are correct. Companies that spend less on marketing and sales for every dollar in sales perform better than other companies in the market. It is a good service and not the advertising investment that makes sales grow. That is why we believe that your best advertising is the quality of the experience that you provide to your clients.
Methodology
Innovation in customer experience consists of a series of proven steps that help companies:
- Identify and prioritize the touch points (moments of truth) on the experience, involved in the customer experience and identify the current state of that experience.Design the optimal future customer experience in these moments of truth; yApply standards of service, staffing and recruiting, training, performance measurement, and reward and recognition programs to ensure effective execution and maintenance of the desired customer experience across the enterprise.Design innovations that produce memorable experiences that enhance loyalty of customers with the brand, while improving the profitability of the company.
As a result, you get a fully aligned organization around a shared vision of the optimal customer experience that sets you apart from your competitors. Random experiences or poor service lead to exceptional and memorable experiences, meticulously planned and reproducible, and where each interaction drives the customer from satisfaction to loyalty and brand positioning. In a commercial environment where services are easily copied, customers take advantage of the consumer experience as a means to differentiate themselves from the competition and do not leave that experience to chance.
After all, no one would build a building without first drawing a detailed plan. Nobody wants their team to take to the pitch without a well-designed game plan, nor would they shoot a movie without polishing the script. Like each of these ventures, the customer experience must also be innovatively designed before it can be executed.
In short, an innovation project in customer experience generally consists of 5 steps:
- Measure the effectiveness of the organization to provide a different experience. Evaluate current experience. Design an innovative customer experience. Implement the experience. Measure the impact of the experience
| Stage | Expected result |
| 1. Measure the effectiveness of the organization to provide a different experience | Measure the organization's ability to provide a different customer shopping experience; according to the company's strategy and the value proposition for customers. |
| 2. Evaluate current experience | Map and document the value proposition and customer experience, identifying the points of contact, pain, and existing gaps |
| 3. Design an innovative customer experience | Design and document an innovative customer experience in key company services |
| 4. Implement the experience | Develop processes, apply tools and implement initiatives to successfully execute the new customer experience |
| 5. Measure the impact of the experience | Rigorously measure the experience and link it to the rewards, recognitions and performance evaluation according to objectives, indicators and management goals at the general level and of the support units (HR, IT, Customer Service) of the company |
A Scalable Solution
We know that implementing an innovative customer experience, which gives the company a differentiation and competitive advantage, can become a heroic task that implies a change of culture, the establishment of new standards of service and the alignment of the entire organization. That is why the Innovation in Customer Experience methodology allows companies to define their vision and service strategy in the long term, and have a roadmap to grow from basic service standards to differentiating service standards (factor “ WOW ”). Once a business succeeds in implementing and maintaining this innovative customer experience, it must constantly keep innovating to always maintain its competitive edge.
Return on Investment
Innovation in Customer Experience offers a real return on investment. The results of these programs are not only seen in the smiles of happy consumers and high levels of satisfaction, but also in the financial results of the company. Some of the indicators that are very useful to evaluate the economic effectiveness of an innovation project in services are:
The increase in…
- Customer retention Customer loyalty (life time value of the customer) Market share
The decrease in…
- Staff turnover HR / training / recruiting costs Marketing and sales costs Acquisition costs per customer
Conclusions
The importance of services in the economy of our countries will surely continue to grow in the near future. Manufacturing shows a tendency to decline, while in industrialized countries around the world there is an increase in the contribution of the service sector to GDP and employment. In addition, innovation is easier to implement with services since there is less infrastructure to replace than in manufacturing, so customers are more willing to accept the changes that innovation implies.
Keep in mind that the inclusion of customer service has become a mandatory function in the sale of tangible services. It is the total customer experience that now determines the overall perception of consumer satisfaction with a brand or organization.
Today, providing good customer service is no longer an element that gives a company a competitive advantage. Good customer service is the minimum price that a company must pay to enter a market to compete. Companies that want to innovate to differentiate themselves from their competitors every day talk more about innovating in the customer experience. The innovation methodology in customer experience is one of the most powerful to innovate in services and take it to the next level.
