Table 4-2 summarizes the connected experiences alongside the domains for which they are best suited and the capabilities a firm needs in order to create these customer experiences.
Recognize-Request-Respond: A Broader View of Satisfying Customer Needs
When we ask managers to list the drivers of willingness-to-pay of their customers, their main focus is usually on tangible and intangible aspects of their products or services, such as quality attributes and brand. Obviously, these are important factors, but the willingness-to-pay of a customer can be influenced by a much broader set of drivers. Every transaction your customer has with you is actually an entire journey, and at every step of this journey there is an opportunity to either delight your customer or have your customer suffer a pain point. We find it helpful to distinguish three phases of the customer journey: recognize—the part of the journey where a latent need of the customer arises and either the customer or the firm is made aware of it; request—the part of the journey where the need is translated into a request for a solution to the particular need; and finally respond—the part of the journey where the customer receives and experiences the solution.
Our research into connected strategies has revealed four distinct approaches that firms use to reduce the friction of this customer journey—in other words, four different connected customer experiences. These customer experiences are distinguished by what part of the customer journey they affect. The respond-to-desire connected customer experience starts at the point in the journey when a customer knows precisely what he or she wants. The firm’s goal is to make it as easy as possible for the customer to order, pay for, and receive the desired product in the desired quantity. The curated offering customer experience acts further upstream in the journey by helping the customer find the best possible option that would fulfill his or her needs. Both respond-to-desire and curated offering can only work if customers are aware of their needs. Firms creating a coach behavior customer experience help their customers at exactly that part of their journey: they raise awareness of needs and nudge the customer into action. Lastly, when the firm is able to be aware of a customer need even before the customer is aware of it, it is possible to create an automatic execution customer experience, where the firm solves the need of the customer proactively.
We want to reiterate that automatic execution should not be seen as the most desirable customer experience for every transaction. Customers differ in how much agency they prefer, and for some transactions the risk of getting it wrong with automatic execution outweighs the benefits. While technologists might see automatic execution as nirvana, good old-fashioned customer understanding is necessary to offer the most relevant experience to your customers, which may require you to create a range of connected customer experiences.
5
Repeat
Building Customer Relationships to Create Competitive Advantage
Henry Ford’s quip on color choices for his legendary Model T illustrates the trade-off between willingness-to-pay and production efficiency: “Any customer can have a car painted any color that he wants so long as it is black.” Ford had no proclivity for black paint. His first car, the Model A, came in red, and the Model F was primarily sold in green. Instead, Ford’s cookie-cutter strategy and one-size-fits-all paradigm came to favor production efficiency over customization.
That same production efficiency preference extends beyond manufacturing to the world of education, an industry that in the United States employs some 3 million K–12 teachers and another 1.7 million faculty in postsecondary education. Curricula are standardized. In France, the Ministry of Education dictates what every student will learn each day. In England, it’s called the National Curriculum. Curricula are the assembly instructions for the production facilities of education.
Having a curriculum is not a bad thing. It holds teachers accountable and helps students achieve predefined learning objectives. It also helps coordinate across courses and schools, and fosters the sharing of best practices. Nevertheless, a standardized curriculum wastes an enormous opportunity for customization. Students have varying motivation, prior knowledge, and maybe talent. A student going through K–12 education will interact with some one hundred teachers and counselors, each one following a different piece of the curriculum.
What is the alternative, short of providing each kid with a set of private teachers? Fortunately, there are alternatives made possible by connected strategies. Consider the following three examples.
In 2006, Salman Khan, an MIT-trained computer scientist with an MBA from Harvard, launched a revolution in K–12 education called Khan Academy. Khan, at that time employed by a hedge fund in Boston, had been tutoring his cousin Nadia, who was struggling with basic math problems and couldn’t get placed in a more advanced class. In addition to phoning her, Khan used a technology called Yahoo Doodle to scribble on a virtual notepad that he shared with Nadia through the internet. As this tutoring proved to be effective, he started teaching her siblings. By 2006, word about his remarkable teaching skills got out and Khan started to upload on YouTube simple videos of himself scribbling notes with some voice annotation. It was the foundation for what became the nonprofit Khan Academy. Ten years later, Khan Academy has over one hundred employees and has amassed twenty thousand videos used by fifty million students and schools around the world.
As a second example, consider the recent development of smart textbooks for college students, discussed in chapter 1. For many generations of students, the only touch point between student and publisher was the retail store, either brick-and-mortar or online. Thanks to online books, a digital connection is now made with the student every time the book is opened. What is the benefit of this? First, publishers (and professors) can track learning activities such as reading or homework preparation. Not only is such automated grading more efficient for the college, it also provides immediate feedback to the student. Immediate feedback is essential for learning. Rather than waiting for the final exam and getting a C because of insufficient preparation, the student knows where he or she stands with respect to the learning objectives of the course and thus can take any necessary corrective actions quickly and without compromising the final grade. Mistakes are made early in the learning journey, and the smartbook guides the student by showing recorded videos of solutions to similar problems or by redirecting the student to the relevant chapters. When the student is ready to move on, the learning activities can be completed in thirty minutes. If, however, the student struggles, the book is patient and guides the student through more hours of learning. Second, the learning activities of the student population create data, often referred to as metadata. Professors can use such metadata to decide what topics need further clarification in the upcoming class sessions. Authors and publishers can use the metadata in deciding what to write and publish next.
Finally, consider the example of Lynda.com, a company that was acquired by LinkedIn for $1.5 billion. Started by Lynda Weinman, it offers video courses geared toward professional skills, such as software development, graphic design, and business. But learners at Lynda.com don’t learn for the purpose of passing a test. Instead, they articulate career objectives by picking a learning path. These paths could be digital marketer, web developer, or IT security specialist. Lynda.com then provides a bundle of video instructions, practice assignments, certification, and career management. Learners use Lynda.com not by simply asking it for one course (such as Essentials in JavaScript) but by entrusting the site with broader career objectives (“Make me a web developer”). At the level of the course, and even more so at the level of a single video lecture, Lynda.com competes with online courses and free YouTube videos. But having been entrusted with its learners’ career ambitions, Lynda.com has secured a position of ongoing personal connection and trust.
This chapter explores the repeat dimension of connected customer relationships. Fundamentally, the repeat dimension strengthens the other three design dimensions that are involved in creatin
g a connected customer relationship: recognize, request, and respond. As you have likely guessed by now, we will be drawing examples from the edtech (educational technology) industry, though many other cases are discussed as well.
After briefly describing how new technologies have shifted the frontier in the world of education, we will introduce a four-level framework of customization. This framework outlines how repeated customer interactions can be used to shift the frontier defined by willingness-to-pay and fulfillment costs. The four levels are:
Create unified customer experiences across episodes.
Improve customization based on past interactions.
Learn at the population level to enhance product offerings.
Become a trusted partner to the customer.
A Shift in the Efficiency Frontier in Education
Earlier, we discussed the concept of the efficiency frontier. Firms face a trade-off between lowering their costs and increasing their customers’ willingness-to-pay by providing them with better or more convenient products or services. In chapter 2, we saw how Blue Apron and Uber shifted this frontier in their respective industries to raise the customers’ willingness-to-pay while paradoxically lowering costs.
What does the efficiency frontier look like in education? If you go back in history, private teachers educating the aristocratic elite through one-on-one tutoring seems to be one of the earliest forms of formal education. The power of one-on-one instruction is obvious: The teacher can spend all her effort and attention on the unique needs of one student. Content and speed of instruction can be customized. If the private teacher comes to the student’s home (or castle), convenience for the student is also maximized. But it is very costly and inefficient from the perspective of the teacher. In the modern era, the teacher would much rather explain the concept of quadratic equations once to a class of thirty rather than having thirty students individually try to learn this skill during her office hours. From an efficiency point of view, it would be even better to give the lecture of quadratic equations in a huge lecture hall, as is commonly done in introductory courses at universities. At the same time, the student’s happiness and effectiveness of learning is reduced. We can see this trade-off in figure 5-1. (Recall that willingness-to-pay reflects the benefits that a student receives, not the price the student is actually paying.)
FIGURE 5-1
The traditional efficiency frontier in education
Private teaching is what Khan provided to his cousin Nadia, much to her benefit. This was only possible because of the love and empathy of her uncle. Let’s do a quick back-of-the-envelope calculation of the costs of having this particular private tutor. As a Harvard MBA working at a hedge fund, Khan likely made somewhere between $500,000 and $1 million per year. Even if he worked many hours per day and rarely took a day off, his average hourly compensation must have been between $300 and $400 per hour. But in an educational setting, a cost of over $300 per hour per student is not a scalable model.
Now let us turn our attention to quality, or how much a student benefits from a particular way education is delivered. Most likely, these benefits are a function of the following factors:
The quality of the instructor
The customization of the content relative to the student’s interests, career ambitions, and learning style
The degree to which the speed of instruction is customized to the ability of the student
The convenience of the educational service in terms of the timing and location of classes
Because of economies of scale, teaching classes of one hundred is much more efficient than teaching classes of ten. This is the reason why educational institutions have long discussions about faculty-student ratios. But the trade-off is that, in classes of one hundred, it is hard to customize either the content or the speed of instruction, not to mention the timing and location of the class.
This brings us back to the idea of shifting the frontier. When the instructional videos produced by Khan were uploaded on YouTube, the cost of production, including his time, was amortized by many more students. On YouTube, EdX, or Coursera, many video lectures have been watched by tens of thousands. Even if we factor in the costs of production, including expenses such as video editing and production (which make it more expensive than simply lecturing in front of students), the cost per lecture per student is reduced to pennies.
But what about the student benefits derived from such video lectures? Aren’t they just as bad as Ford’s slogan, “Any customer can have a car painted any color that he wants so long as it is black”? The answer has been the biggest surprise to all those active in online teaching: no. To understand why, let’s go back to the drivers of student benefits mentioned earlier.
First, consider the quality of the instructor. Hundreds of years ago, those seeking entertainment and amusement would go to the local market to watch a clown or acrobat. Clowns were not making fortunes, but there was enough demand for this type of labor that pretty much any town would bring enough business to support its own clown. The clown profession, however, changed abruptly with the introduction of film technology. In times of movie theaters, the production of films was centralized, reducing the cost per laugh and limiting the demand for clown labor. For clowns, this was a sad story, but not so for the audience. Because the best clowns would star in the movies, the audience now could watch those who were really funny. Teachers and clowns have more in common than most in our profession would like to admit. With 3 million teachers in the United States, we have about 250,000 teachers per grade level. If we further break this up by subject, we end up with some 50,000 math teachers in eighth grade. Every one of these 50,000 teachers will explain the concept of quadratic equations each year. Most of them will do it well. Nevertheless, the idea of watching the very best teacher on video is increasingly appealing to students and parents alike.
Who teaches where has long limited the ability of schools to offer a wide range of topics. For instance, which foreign language you learned in elementary school, if you had the privilege of learning one at all, depended on which school you attended. Few elementary schools have the resources to teach French, Spanish, Mandarin, German, and Hebrew. In contrast, platforms like Rosetta Stone that serve a national and even global market have scale. They are thus in a much better position to provide students with the language instruction they desire.
The award for Most Popular Customization Tool in Online Education (we made that up) should be given to the pause button on the video player. In a lecture hall with one hundred students, there are only so many times a teacher or professor can pause and repeat herself. Online, there are no limits. If a student is distracted, the content is difficult, or the explanation of the professor is unclear, all it takes is a click and the video is paused, allowing the student to reflect and replay. As experienced online teachers, we also learned from our students that the second-most-popular tool is that for adjusting the video speed. Apparently, when watched at 1.5 times the normal speed, some of our most boring lectures become tolerable.
Finally, there is the effect of convenience. The new generation of learners, whom we as professors now teach, grew up with online devices and are accustomed to the “anytime, anywhere” paradigm of our society. From Khan Academy to smartbooks and from Rosetta Stone to Lynda.com, convenience is a key need and expectation of many users that we as educators might not welcome but must embrace.
Before we continue, a clarifying comment is in order. Being both parents and experienced online teachers, we by no means want to imply that kids should be educated by video instruction alone. Teachers will always play an important role in education. Nevertheless, technology has changed the way education is organized and has shifted the frontier, leading to bigger student benefits at lower costs. The following sections dive into greater detail on how the repeat dimension especially can shift the frontier in education and other industries.
Create Unified Customer Experiences across Episodes: Strengthen “Recognize�
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Up to this point, we have discussed customer experiences with firms by looking at one episode or transaction at a time. But the greatest potential of connected strategies lies in creating deep, ongoing relationships with customers that weave together multiple experiences. The repeat dimension is thus fundamental in transforming stand-alone experiences into relationships. The first step to achieve this goal might sound trivial, but it is essential and turns out to be quite difficult: you need to be able to identify the customer and treat him or her as the same person whenever you interact, regardless of when and where this interaction takes place. Only if you keep track of your customers will you be able to learn more about them—that is, improve the recognize dimension of connected customer relationships.
Such a customer-centric view is remarkably uncommon. For instance, in the world of education, students traditionally interact with the school or university one course at a time, and it is up to the student to stitch together a coherent experience. A connected strategy approach, in contrast, focuses on the learner, not the course. This allows the aggregation of otherwise disjointed learning experiences into one unified learning journey. Teachers and counselors have access to the data of past student performance, and no student falls through the cracks, which increases the quality of the instruction. Costs also come down at the same time by saving teacher and counselor time that is otherwise spent trying to make sense of poor student performance that could have been predicted (and avoided) much earlier.
Similarly, in the world of health care, most of us have experienced the annoyance of checking in at a physician’s office. How many times must we as patients provide our medical history, our allergies, and our insurance information? Wouldn’t it be nice if, when our sleep pattern suddenly becomes abnormal, our physician is put into the loop? Chances are that if we are Apple Watch users, Apple now knows more about our health than our doctor, for whom we are patients when sitting in the exam room but strangers when we are not.
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