Chapter Five
‘History has shown that many of the innovations that we have come to take for granted were a result of entrepreneurs, pioneers and early adopters willing to invest their own money, and sometimes lives, in a big idea.’ RICHARD BRANSON, FOUNDER, VIRGIN GALACTIC
Richard Branson wrote those words some years ago, little realizing that on 31 October 2014 his comments would, sadly, come true. His spaceship, VSS Enterprise, suffered a catastrophic malfunction leading to the total loss of the aircraft and the death of co-pilot Michael Alsbury and serious injury of pilot Peter Siebold.
Recognizing that his vision was putting other people’s lives at risk Branson wrote: ‘I found myself questioning seriously for the first time, whether in fact it was right to be backing the development of something that could result in such tragic circumstances. In short – was Virgin Galactic, and everything it has stood for and dreamt of achieving, really worth it?’
He goes on to report: ‘I got a very firm answer to that question immediately when I landed in Mojave. From the designers, the builders, the engineers, the pilots and the whole community who passionately believed – and still believe – that truly opening space and making it accessible and safe is of vital importance to all our futures.’
Bill Bernbach, founder of the celebrated ad agency Doyle Dane Bernbach (DDB) was fond of saying ‘A principle isn’t a principle until it costs you something.’ Similarly, we believe that the true test of purpose is if you stick with it in the face of adversity. All too often, organizations define some uplifting purpose, or conceive some great customer innovation, only to dump it as soon as they have to invest substantially in order to deliver it. The true test of Virgin Galactic and Sir Richard Branson’s dream is how they deal with the aftermath of the VSS Enterprise tragedy and whether they continuously innovate until they achieve their dream.
We often run workshops with executive groups to help them define their purpose and we test commitment to it by identifying what we call ‘the sticky moments’. What are those things that are likely to happen that may cause the executive group to gulp and waiver in their resolve?
We were running a workshop for Premier Inn, the hotel brand, to help them define their purpose of ‘Making guests feel brilliant through a great night’s sleep’. We invited the executives present to identify their ‘sticky moments’. One plucky regional operations manager piped up and said, ‘We have thousands of old rooms without adequate sound proofing or air conditioning. What will our people say when we announce this purpose and they are still dealing with guest complaints?’ The room went quiet and then Patrick Dempsey, the Premier Inn managing director, asked the question, ‘How much will it cost us to fix it?’ The answer was in the millions of pounds. Right there, the executive group decided to invest in upgrading those rooms. It was in that moment that the Premier Inn purpose moved from being a set of words to a mobilizing force in the organization.
Let’s face it, most companies wouldn’t innovate if they didn’t have to. It’s not that people hate new things, it’s just that innovation is often risky, expensive and fraught with failure. There is a well-known phrase: ‘if it ain’t broke, don’t fix it,’ which probably sums up many people’s views about innovation.
But the fact is that innovation is necessary. We would not have any of the technology we enjoy today without it. We would not be able to drive, fly or even catch the train, things we now consider commonplace. Yet way back when these technologies were being developed they were considered just as risky as space travel is today. It is bizarre to think that just over 100 years ago the ‘Locomotive Laws’ required a person to walk in front of the newly invented automobile carrying a red flag to warn pedestrians of the danger posed by a vehicle that was restricted to a maximum speed of 4 mph. In 2014 the UK government passed a law allowing the use of driverless cars from 2015; Google has been testing driverless cars for some time in California and Nissan has introduced driverless features into its vehicles, such as ‘park assist’, where the car literally parks itself at the touch of a button.
The need for innovation is accelerating. Increasingly, customers are demanding more from their brands. What was innovative yesterday is commonplace and expected today. The cycle of product replacement is ever shorter. The first Apple iPhone 1 was released on 29 June 2007. By 2014 they were on version 6. That’s six versions in seven years. When the first iPhone was released it was revolutionary; today, it seems like commonplace technology. This inflationary effect keeps raising the bar and fuelling the need for new, different and better approaches to business.
Digital, mobile and web technologies have increased the rate of consumer demands and the speed of response they expect from companies. Time has never been a friend to the business person but it is now openly hostile. New products have an increasingly limited window before being replaced or copied. In fact they are often superseded, imitated or hacked while they are still in development. Competition is everywhere and accelerating the rate at which people can find and buy almost whatever they want whenever they want it.
One problem for many organizations, when they think about innovation, is that typically they focus on the product. However, we know that customers form relationships with brands, not products. And we know that the areas of that relationship that are often given least attention but which mean most to the customer are in service, sales and support. According to Peter Fisk, founder of Genius Works (@GeniusWorks), whereas the vast majority of innovation efforts by companies have been linked to product, the biggest returns on investment have actually been in new business models (eg online shopping) and in the customer experience. Think of brands such as Google, Facebook and Alibaba: they are among the largest brands in the world in terms of capital value yet they didn’t exist 15 years ago. They do not manufacture products, they do not find scarce resources, they do not bring vital new drugs to market, they simply connect people digitally to things made by others and yet the returns for their founders are huge.
Constantly innovate in both large and small ways
Purposeful organizations are possessed by a relentless commitment to improvement, to seeking a better way. Sometimes it can be a huge game-changing innovation, as in the case of Virgin Galactic. But often it is just the everyday focus on innovation in many small ways throughout the business. Just so long as they make things better for customers.
A problem with innovation is that many business people are obsessed with ‘the big idea’; they want ‘game changers’ and are constantly poring over customer data to try to come up with the ‘killer app’. Of course, if you can come up with a game changer, then that is great. The reality, however, is that this may only buy you a short-term advantage because of the tendency for brands to rapidly first play ‘catch-up’ and then ‘leapfrog’ in terms of technology. It wasn’t so long ago that Nokia was the leader in mobile phones. Where are they in 2015? The brand has been acquired by Microsoft and has, for most practical purposes, ceased developing its own technology. So even more important than these big things are the little day-to-day things that make an enormous difference to consumers and employees – that earn their advocacy and loyalty, cost little but reap financial reward and demonstrate your commitment to creating value for customers.
Purposeful organizations understand that ‘little things have a big impact’. They are often obsessed by detail and are endlessly curious about even the smallest aspect. Whether it is digger manufacturer JCB’s chairman Sir Anthony Bamford personally adjusting the hub cap on a backhoe digger because he noticed it wasn’t quite right, or smoothie manufacturer Innocent’s annual ‘Big Knit’, they are all manifestations of the fact that a small action can have a big impact on the perception that customers have of you. Zappos, the online retailer, understands this perfectly. One of their core values is to ‘live and deliver WOW’. They believe that creating moments of ‘WOW’ have a huge impact on creating a distinctive customer experience. These ‘magic moments’ form an essential ingredient in customer experience design.
Drive innovation from a deep understanding of what target customers value
As we already mentioned in Chapter 4, history tells us that most new products fail. So how do you ensure success when you are changing 30 per cent of your products each year? To restate Mark Constantine of Lush: ‘The key is making sure the customers clearly understand what you’re doing and debating with them beforehand to make sure the product does what they want it to do at a price they are willing to pay.’ Sometimes this approach leads to dropping a product, which makes every kind of sense – except to the customer. Again, to restate Constantine: ‘When you get yourself aligned with the customer, it isn’t about profit and loss or pushing your product. It’s about producing what your customers want to buy.’
This was a principle used to good effect when Sonu Shivdasani and his wife Eva were planning their luxury hotel brand, Six Senses, in the Maldives; they called up tour-operators and travel agents and asked them what customers complained about: ‘There were things like “the lack of fresh food: everything was imported and tinned”,’ he said. ‘So we developed our own organic garden, which means we could actually offer our guests much fresher and more nutritious salads than they get in London.’
It is also important to understand that what you sell is not necessarily what customers are buying. RayBan thought they were selling eye protection; Chilli Beans, the Brazilian retailer, realized that customers were buying a fashion accessory. This insight led them to create a business model that produced sunglasses of good quality, but exceptional variety – 10 new product designs are launched in over 500 stores and franchises every week! Because of this, a typical customer will own three or four pairs of Chilli Beans and visit the store weekly to see the latest models.
http://www.chillibeans.com/sunglasses.html
Use your purpose to drive growth
Umpqua Bank is a community bank based in the Midwest of the United States. It has created a reputation and enthusiastic following for its innovative approach to banking. By calling its branches ‘stores’, recruiting its people from retailers and using innovative marketing techniques that it calls ‘handshake marketing’ that is so personal you can almost shake the hand of the customer, the bank seeks to deliver on its promise of being the world’s best community bank. One example of this approach to ‘handshake marketing’ was its use of an Umpqua-branded ice-cream van, which drove around the streets of California to create brand awareness in this new and important market.
Ray Davis, the CEO of Umpqua Bank, says:
‘Innovation permeates our organization at all levels. To me, that’s the most important driver of our organic growth. The second route to growth, of course, is through acquisitions. The reason that we’ve been so successful with acquisitions is because we’ve created a very unique culture that aligns our people with the Umpqua strategy and brand.’
So having a clear sense of what you stand for not only helps you to stay ahead of competitors through being more innovative but also helps you to acquire other organizations and meld them into your own. It is interesting that so many companies conduct due diligence to explore the economic benefits of making an acquisition or merger; they investigate the pension plans for compatibility, they compare customer lists looking for revenue opportunities, they overlay distribution maps to identify supply chain synergies. But how often do they compare their organizational purposes or what their brands stand for in order to ensure a good cultural fit?
Use innovative technology and processes to support the delivery of a superior customer experience
Umpqua, LEGO, Chilli Beans and many other brands use social media and their websites to create customer communities. Burberry uses 3D high-tech broadcasting of their runway shows; and Chilli Beans uses music and events to involve customers in the Chilli Beans world. O2 drives innovation through continuous customer feedback by involving them in events and their participation in customer communities such as giffgaff, its ‘people powered network’. First Direct uses its online ‘Lab’ to generate customer feedback.
But the technology does not have to be digital to support an innovative idea. Six Senses refuse to fly in any branded bottled waters to any of their properties. Instead they invest in their own water filtration and mineralization plants at their resorts to bottle and sell their own water; 50 per cent of the proceeds of these sales go to a water charity to provide clean water in places such as India. The environment benefits, as do the customers. As Sonu Shivdasani, founder of Six Senses, says:
‘You need to stay true to your purpose – it becomes the compass that guides you.’
Six Senses’ purpose is ‘intelligent luxury’, by which they mean environmentally sustainable.
Encourage your people to demonstrate superior skills and capabilities
Sir John Hegarty, the founding creative director of advertising agency BBH, says:
‘When you are in a [creative] environment such as ours, it is fundamentally important that the creatives feel that what they do is the most important thing in the company; that they are being encouraged to do what they want to do. If you don’t have that, you won’t get them pushing themselves to create the kind of work that they want to create. So it is fundamentally important that I encourage an environment of constant innovation, and that they know that when they do creative work, I am going to take it seriously and I am going to sell it as best I can.’
This should remind us of the final point that all these companies realize about innovation: in the end, it is only important if it is going to make a difference to delivering your organizational purpose and, ultimately, value to customers. Moreover, if it is going to make a difference, it has to be sold to customers or consumers with passion and with the conviction and commitment that it will be delivered. That is where having a purpose really helps. It keeps you focused on the things that really matter.
Focus innovation on the things that make you different
In Chapter 4 we looked at how to differentiate the customer experience through creating brand hallmarks. We advised over-indexing on those things that drive value for customers and the brand, and accepting that it is okay to meet basic satisfaction levels on the things that do not. If you do this, it presents you with a very focused agenda for innovation because you know exactly where investment is required to accentuate what your brand stands for and increase your differentiation. A good example is Amazon Prime Air. This is the innovative service that Amazon is developing that is designed to get a package into the hands of the customer in less than 30 minutes. The high-profile manifestation of this service is a drone that delivers your package to your door. The regulatory challenges, the logistics and the costs are significant, so why bother? Because state-of-the-art convenience and rapid deliveries lie at the very heart of the Amazon DNA and their differentiation. The drone dramatizes what the brand is all about.
So let’s look at some inspiring examples of innovation in customer experience.
Umpqua Bank
Umpqua Bank has a promise of ‘being the world’s best community bank’. This means not only being deeply rooted in the community, but also going above and beyond customer service and transforming the mundane task of banking into an unexpected, engaging experience.
An example of their approach in thinking of innovative ways to help people switch banks is in their choice of three different media venues that are a more interactive, tactile and stirring delivery method than the usual banking choice of TV and advertising. Here’s a quick introduction into what they are doing.
Bank account-moving day
Umpqua think of themselves as the community’s best friend. And what would a best friend do? Help you move. Umpqua transformed an old moving truck into a one-of-a-kind bank account-moving truck. To take the hassle out of switching, the team drove all around the US north-western states taking all the heavy lifting out of moving customers’ accounts to Umpqua. The truck comes equipped with ready internet-access laptops, enabling customers simply to step into the truck and switch banks there and then using an e-switch kit.
Switch-kit-in-a-can
One of Umpqua Bank’s goals was to engage potential customers into switching their bank accounts in a fun and unique way. So they introduced completely customized vending machines and stocked them with free bank switch-kits-in-a-can, symbols of a refreshing change, and placed them in all types of locations in the north-western states.
Locally grown community kit
For Umpqua to be seen as the world’s best community bank, it recognized the need to be informed, take action to inspire, protect and develop members of their community. So Umpqua developed the Locally Grown Bank Accounts programme that focuses on empowering the local community. Umpqua showed their support by appearing at all sorts of community events, from farmers’ markets to fairs. Their farmer market stands are fully stocked with fresh Umpqua blend coffee, wildflower seed packets, authentic market bags and the handy switch-kit-in-a-can.
In keeping with this, they issued guidance to all staff to act as people, not as bankers (easier said than done)!
LEGO
LEGO has pioneered innovation driven by its customers. It has not just listened to its customers, it has actively encouraged them to collaborate, co-create and customize the experience of ‘play’.
In 1997, the LEGO Users Group was formed by a couple of enthusiasts on the internet and quickly grew. It enabled LEGO to make the simple observation that its customers were not only children; a large part of its fan base was adults. Moreover, the adults were often the most passionate users of the brand. The company eventually gave these super users a name: ‘Adult Fans of LEGO’ or ‘AFOLs’. The company began to tap into the insights and experiences of these AFOLs. Through basic digital channels such as e-mail, they were able to share insights as to what made a great LEGO experience and ideas for new ranges. They discovered that among their users were doctors, architects and designers. These were people who could not only suggest an idea for a range (ambulances, for example) but also give valuable insight and practical detail as to how to make the suggested range as authentic as possible.
The user group evolved and with the advent of social media and the expansion of digital technology it became an even more populous and creative community. So valuable were these super users in both product development and brand advocacy that LEGO named them ‘ambassadors’ and created the LEGO Ambassadors programme for them.
Listening and working with them, the company understood that its brand was not restricted only to real ‘bricks’. The essence of LEGO branded product is not the brick but the ‘shape’ of the brick, a distinctive visual style that actually translates well into digital design because of its slightly ‘pixellated’ appearance. And the essence of the brand itself lies in the unlimited imagination of constructive play. Users would make their favourite superheroes or famous people out of the bricks and then plunge them into an exciting world of adventure. This world might look like the kitchen table to you and me but to the user it is a plateau of fantasy. So it did not take too much imagination for the company to realize that its customers would appreciate LEGO versions of superheroes and villains and electronic games in which they could play. The franchise deals that the company made with Star Wars and Harry Potter not only fuelled sales; they also brought the brand into the modern era.
In 2014, the company redeveloped the Lego Users Club into a new type of network community whose aim would be more explicitly to create, collaborate and share ideas. The new ‘LEGO Ambassadors Network’ even has its own ‘charter’ with the following purpose and objectives:
Purpose:
A community network for both the LEGO Group and influential adult fans of LEGO (AFOLs) to provide valuable dialogue and initiate activities of relevance to the success between the LEGO Group and the AFOL community.
Objectives:
- To provide a central communication network for the LEGO Group and user-group ambassadors to: 1) collaborate and share information with the wider AFOL community; 2) to strengthen best-practice sharing within the AFOL community.
- To provide a point of contact between the recognized LEGO User Group and the LEGO Group in all support programmes and related activities.
- To be task oriented, by having clearly scoped activities and discussions that benefit the LEGO Group and AFOL community.
- To provide valuable insight on ad hoc business decisions and intelligence.
You can find more about it here: http://www.brickwiki.info/wiki/Ambassador.
An early example of how LEGO collaborates with its customers was its Mindstorms range. Mindstorms was conceived as a way of offering electronic LEGO to a new generation of children who were growing up in a world dominated by electronic gaming such as Nintendo Game Boy. Mindstorms, developed together with the Massachusetts Institute of Technology (MIT), were LEGO bricks containing software and sensors that allowed customers to programme their creations to move – effectively creating LEGO robots. Within weeks of it being launched, an estimated 100,000 people had ‘hacked’ into the software and were reprogramming it. LEGO understandably feared that this illegal hacking would be malicious, aimed at disrupting the programmes or stealing the software codes. In fact, they soon realized that these ‘hackers’ were intent not on destroying the product but on improving it: 100,000 LEGO fans with software program skills had spontaneously collaborated to create an even better experience for themselves and for all LEGO users. Think of that: 100,000 computer programmers working for free to build you a better product. It was one of the earliest examples of open-sourced innovation. And LEGO has continued to embrace this mindset of openness to direct customer creation of the experience in all its developments since.
The latest innovation is called LEGO Fusion. It responds to the twin trends of increasing digitalization and desire for personalization (see Image 5.2 opposite). It allows you to take your favourite LEGO toy – your own creation from real LEGO bricks in the real world – and then to scan it digitally and upload the image into a world of gaming. The 3-D image of your toy then becomes a ‘lifelike’ character in a virtual world, interacting with other pre-existing characters or ones created by other customers.
LEGO’s closeness to its customers and its openness both to listening and to allowing customers to create their own experience have helped drive business growth. By September 2014, LEGO had become the world’s number one toy maker, with just over $2 billion of sales globally in the first half of that year alone.
KPMG and McLaren
It is not just in the world of consumer products that exciting innovation can happen. It can happen in the business-to-business (B2B) market. It can even happen in the field of accounting audits and business advisory services.
McLaren Motors is one of the leading brands in motorsport. Dynamic engineering and rigorous technical expertise drive its high-performance technology. Data analytics are key to everything it does. Every element, every detail of every aspect of its Formula 1 cars, the drivers and the crew are meticulously analysed and that analysis is translated into real-time information that improves performance, often shredding valuable micro-seconds off the time it takes to complete a lap.
Image 5.2 LEGO encourages anyone to come up with an idea for a product
Source: LEGO
McLaren makes money from multimillion-dollar partnerships with business-to-business (B2B) and business-to-consumer (B2C) brands that want the awareness and image enhancement that come from association with Formula 1 globally. Household brand names such as Diageo’s Johnny Walker whisky, Vodafone and Santander benefit from the excitement, thrills, sexiness and raw drama of the track.
KPMG is one of the leading accounting and management-consulting firms. It is also a partner of McLaren’s. However, their partnership is a unique and innovative one. KPMG’s purpose is ‘To turn knowledge into value’. So, rather than simply benefit from the glamour and high-performance image of an F1 team, KPMG use the access to McLaren’s technology to benefit their customers’ experience.
In November 2014, KPMG and McLaren announced a 10-year strategic alliance whereby KPMG will have access to McLaren Applied Technologies (MAT) predictive analytics and technology programmes. This can be used to improve the quality and impact of auditing and of business advice. Businesses who have large mobile workforces where speed of response is important (such as telecom firms or utilities companies whose employees are often driving around cities and towns in vans) can benefit from the kind of predictive analytics that help McLaren to turn around their F1 vehicles in pit stops within seconds.
Simon Collins, UK chairman of KPMG, said of the deal:
‘Our alliance with McLaren gives us the opportunity to accelerate the transformation of our audit and advisory businesses. McLaren has honed sophisticated predictive analytics and technologies that can be applied to many business issues. The same is true of our advisory services, where we believe applying McLaren’s predictive analytics and know-how to, for example, a complex international supply chain, could help our clients make a step change in the service they provide to their customers.’
Formula 1-powered accounting? Now, that is innovative.
Hointer – changing the way people shop
One of the most innovative brands we have come across in a while is the Seattle fashion retailer Hointer. The brand’s purpose is to change the way that people shop. The company’s CEO, Dr Nadia Shouraboura, is a retail revolutionary. She has extensive retail experience and was the former head of supply chain and fulfilment technologies for Amazon.com. She melds these experiences into a totally new concept in the Hointer brand.
Let’s hear the story in her words.
Our purpose is to change the way people shop in physical stores. I think it is long overdue. We have made enormous progress in online in the last 15 years, but very little has been done in physical stores. I am actually more excited about physical stores than online, because our community is bigger.
Stand out
For many years I have been reinventing the e-commerce experience, and I thought it was the answer to everything. I was absolutely convinced that we can get online experience to a point where you don’t need physical fulfilment at all, you just click and you are done. It was only when I encountered apparel that I started to think that it would be nearly impossible to create a phenomenal customer experience online for apparel, or some of the other products that we want to touch and feel. So I started to think about the perfect shopping experience, and that brought me back to the physical store.
It is very easy to say that you are going to be great at everything. But it’s just impossible because you don’t know what to focus on. I think just as important as thinking about who you are, is thinking about who you are not; what you are not going to be good at, because you cannot be great at everything. You cannot be great to your customers, to your employees, to your suppliers, to your shareholders and to the community. So you need to decide who is your primary focus, whom do you care most about, and what is your primary purpose? After that, everything becomes very simple. It’s not that you physically want to suck at some things; it’s just that you prioritize them below other areas, so they are not your strengths.
Distinctive customer experience
We put the customer experience above all. For us, employees are definitely secondary, and we all know that. Let me give you an example. If it is midnight and we just realized that we missed a customer order, the question is do we wait until the morning, or is one of our employees going to put it in his or her car and deliver it? We consciously make a decision that for us the customer experience is the most important priority, so yes, we will do things like that.
Also, what we don’t do is put technology first. We actually don’t think about technology at all, even though we are a technology company. We first think about the experience. How do we really want our customers to shop? What do we want to happen when you come in? How do you want to search for your products? Where do you need information about a product? What is the easiest way to request a different size? So we write down how we want the experience to be, and then we try to make it happen through various means. It can be technology, it can be the process, it can be employees, and it can be even be via robots. It can be whatever it needs to be, but it’s definitely not the technology.
Continuous innovation
We try to make sure that our mobile experience looks and feels very much like our in-store experience. Our in-store actually looks a bit like the website, so when you tap an item when you are in store, you get information and you get pictures, you get exactly the same thing when you shop from home. Then we try to make sure that when you shop in the store, we learn as much from your shopping experience as possible. When you shop from home using your mobile experience, we use that information. For example, we show all the items that you viewed in store, those that you liked and those that you didn’t so you can recall your experience. If you are trying to buy items online that you already tried in the store in the past and didn’t like, we will remind you of that.
Image 5.3 The Hointer retail experience
We continuously experiment with our displays; it is part of our innovation. We make sure it’s easy for customers to look at displays, but what we try to do is make displays disappear so that customers really, really focus on the product. So when customers walk around, that’s what they see. They don’t really see displays, because they are so minimalistic. If you are a customer your focus is to buy the product, you don’t have to look at the display. So, you want to see every detail of the product.
Infectious communication
We try to pool customer feedback on the product, and provide that to our customers. I think the reason it is very important is because when you are in a store as a customer, you have an experience with the product as it is now, but you don’t know what is going to happen with it in three months from now, and customer feedback frequently gives you that. It tells you not only what the product is like now, but also how it has performed. So we are trying to get customer feedback online and make that available to customers in store. When you type in a product, you land on a product page and it gives you the information from the manufacturer but it also gives you feedback from other customers. You use the information in very different ways because you want the manufacturer to tell you what the product is made of, but you really want customers to tell you how it will perform a month from now.
Then we went even further and we started to integrate the customer feedback with social media. So for example when we added the ‘Prince Harry’ range, we added the most frequently pinned image to our product page, and for our docker pants, the most frequently pinned image by the customer community was Prince Harry wearing the product. The results were phenomenal. From being one of the least frequently tried products in the store it became the most frequently tried, literally overnight. Everybody wanted to try it, so I think the connection with social media in a physical store is very, very important because when I pick product images to show, I could be very wrong, but crowdsourcing the most relevant images works phenomenally well. We continue to double down on that, because it worked so well for us. We are spending more and more time trying to figure out the smart way to integrate social media content with our physical store experience.
Our purpose is not to sell jeans or groceries; our purpose is to change the way people shop. So for us, the fastest way to change the way people shop is to create the largest possible community of retailers who are innovating with us and using our technology. So, that is our business model.
So what can we learn from these examples about how to stand out?
- Purpose driven: you have to have a crystal-clear vision of your purpose and drive this through your customer experience ensuring that everything is aligned with it. Hointer is an example of a brand with a big idea.
- Purposeful leadership: leaders have to ‘walk the talk’ if they are to make the tough strategic choices and appropriate investment in the experience, and also the conviction to instil the culture to deliver it. O2 did this by channelling investment to those areas that the customers valued most.
- Decide where to over-index your customer experience: this is so that you create pleasure peaks associated with your brand promise. Making savings at those touchpoints that matter less to your customers or your differentiation can fund these. Lush did this by saving on packaging to spend more on ingredients and the store experience.
- Distinctive customer experience: people do not buy Innocent smoothies simply because of the woollen hats; Lush is not the most highly recommended retailer simply because it doesn’t use packaging; Metro Bank providing dog bowls in the branches is not the reason that people bank there; customers do not choose to stay in Best Western purely because of their stories; consumers do not flock to Burberry because of their fitting rooms, but these are the things that they became famous for. All of these things are hallmarks of the brand and a manifestation of their purpose. They serve to dramatize the experience just as IKEA’s inconvenient self-assembly reinforces the consumer perception that what they are paying for is well-designed furniture at a low price point.
- Ensure that the brand experience is consistent across all channels: so that irrespective of how the customer chooses to interact with you, the hallmarks and their perception of the brand are the same, and the experience they deliver is just as good. This requires a consistent tone of voice and a single view of the customer across all channels. Best Western ensured that the ‘personality experience’ was delivered across all media.
Having looked at the elements of stand out, infectious communication, distinctive customer experience and continuous innovation, let’s illustrate all of these principles with a couple of example brands that have embraced most of them.
We wrote a book a few years ago called See, Feel, Think, Do: The power of instinct in business in which we argued that business was becoming too formulaic, too left brain, too analytical and that it needed to move back to being more visionary, right brain and instinctive. Tim Wade touched on this when he spoke about Best Western and the ‘personality experience’. Let’s return to our other hotel example – citizenM that we introduced in Part One.
Whereas Best Western has its origins in the United States – is large, long-standing and has many old, individually owned properties – CitizenM is Amsterdam based and is small, young and innovative. So, two hotel brands with very different business models. This book is written on the premise that starting with your brand purpose (providing that it is unique) leads naturally to creating a distinctive customer experience and a unique culture. Rattan Chadra spoke passionately about his desire to create a new business model for the hotel sector. But how do you go about translating that into a distinctive customer experience so that you really stand out from competitors?
citizenM
Stand out
Let’s hear directly from Robin Chadha, citizenMarketing.
We started by looking at the target audience. The people who like citizenM are people who are young at heart. They are very well informed. They have technology at their fingertips so they can compare prices very quickly. They know the value, say, of the dollar or euro or pound, and they are willing to pay for certain luxuries, but they are not willing to be taken for a ride.
We took a two-tier approach: first, what is their lifestyle? We were looking at other brands that they associate themselves with or the aspirational brands that they want to be associated with. And then, second, looking at them in terms of the hotel experience. What do they like? What frustrates them?
These people are contemporary travellers. They know how to book a flight online. They get their QR code so they don’t need to print out the boarding pass. They carry hand luggage only. They are not going to pack their large-size shampoo or water bottle, because they know they are going to get stopped at security. So it’s all about speed and efficiency for these people.
When it comes to their lifestyle, it’s a little bit of mix and match. People want to spend their money on certain luxuries, but for other things they prefer to buy what is smart and efficient. I describe this social group in this way: ‘They travel by train but drink champagne.’
Out of all that data came the idea of these mobile citizens. So we said: ‘Let’s actually name the brand after our target audience: citizenM.’
Stand out – infectious communication
Then we started looking at how to communicate with them. When we first launched in 2008, a lot of the social channels weren’t really there. So we did a lot of communication through our own channels, such as our own website, to tell the story. We made a brand movie to show this big idea: why we were doing this; not how good we are or how cool our rooms are or our technology, but why there is a need for this. Why this hotel is for you.
Social content is used to communicate why you should book citizenM. Genuine reviews from guests who have actually stayed with us are pulled in from TripAdvisor. We also have our citizenMag that is based on the target customer’s lifestyle and what is relevant content for these people when they stay in different cities. What do they do there? Where do they eat? Where do they drink? Where do they go for a morning run? What is a cool little trail that only the locals would know? More and more people want this kind of local experience when they travel. We have customers who are contributors to citizenMag from all around the world; it’s a platform for our customers to share.
The way that we usually run campaigns is to start with a teaser, often on Facebook, to engage with people. For example, when we came to New York, we had a campaign called: ‘Letters to Locals’. We wrote a letter to famous New Yorkers in a very kind of naive way: we wrote to Andy Warhol, to Donald Trump, to JayZ. One of the letters was to Woody Allen asking him to make a little promotional film for our new hotel in Times Square: ‘Something along the lines of your most famous film – Manhattan, not Antz.’
We’re shooting a video with a very famous stop-animation artist called Pez who is making a one-minute movie for us about affordable luxury. He usually averages about 1 million hits per video. So we’re doing a lot of things online just to get the buzz going. And it’s measurable. That’s the nice thing about online. I’d rather invest in that than putting a big billboard on Times Square, because how do you measure the impact of that?
Stand out – distinctive customer experience
We thought long and hard about our marketing communication: how do we advertise? How do we communicate? We came up with the idea of a tone of voice that is about communicating directly: ‘citizenM says’. Our citizenM sayings are very, very strong and we use that as the basis for our communication platform. We came up with an idea to use traditional hotel clichés and exaggerate them to our benefit. In London our main tagline was: ‘London, you look like you need a new place to sleep.’ We also had taglines like: ‘citizenM says: Death to the trouser press,’ or, ‘citizenM says: ‘Why pay for bits of a hotel you don’t need?’ Then we pushed the boundaries a little bit more, so one said: ‘citizenM says: Stay in a hotel that is 400 metres from here and a million miles from the Hilton.’
Image 5.4 citizenM marketing communication
We rented a stretch limo in New York and had a huge poster stuck on the side that said: ‘Luxury isn’t a long car; it’s free Wi-Fi and free movies on demand.’ Then we took the car and took pictures of it in front of the Marriott and the Sheraton. The Marriott got angry with us. We actually wanted to park the limo and get it towed away. We also got the classic luggage trolley that bellboys use, and we put branding on it saying: ‘Luxury isn’t a bellboy taking your luggage up to your room, it’s fresh cappuccino and free Wi-Fi.’ We took the trolley to the other hotels and took pictures of it in front of them. All of this created great content for our own social channels.
We think about the complete end-to-end customer experience. The customer has been inspired through awareness to come to our website. Then comes the critical decision moment: why should I book citizenM? So you need to provide justification. Why is this better for you than staying at the Sheraton or the Marriott or some other hotel? Then comes the actual booking moment: how easy is your booking process? What happens after booking? What should the pre-stay communication be like? For example: ‘Thank you for booking with citizenM, we’re looking forward to receiving you on this and this date. You’re staying in London. By the way, did you know that the Tate Modern is showing an exhibition by Roy Lichtenstein? Click here for discounted tickets, brought to you by citizenM. Borough Market is serving fantastic burgers on Saturday, you should check it out.’ Pre-stay communication is very important.
Then of course you have the actual experience of staying at the hotel. I think that we have this down pretty well. But what happens post-stay? You’ve checked out, we should communicate to you right away: ‘Thank you for coming.’ Maybe get some feedback. Write a review. Or give the guest a special promotion for the next time they come. Inform them about our up and coming hotels that are opening. That means the next time they don’t need to come in through the awareness channel. They come in straight at the booking stage.
We need to be up to date on what is happening. To be very well informed about what is happening in industries such as art and fashion and media and technology. To be aware as to where the customers’ preferences are shifting and where the trends are going. I always put myself in the shoes of the customer and I speak to people in different industries just to keep my fingers on the pulse of what is happening, Otherwise how do you stay on top of the trends? You need to be relevant for customers going forward otherwise you die. Let’s put it this way, if we had simply recreated citizenM Schipol in New York, I’m not sure if it would really still be innovative because we have taken the brand further. And of course the technology has improved. Our check-in is faster. We have the tablets in the rooms. We now have digital art screens in New York.
We are continuing to define the brand as we progress: for example, I’m busy creating a sonic identity; we are also creating a citizenM olfactive identity. The whole olfactive brand exercise is very interesting. I found a company in New York called 1229 and spent the whole day with the ‘nose’. I wanted her to really experience citizenM, so she stayed in London for one or two days, and I sat down with her and spoke to her about the brand and then we did the actual exercise of the scenting.
She told me, ‘Before we start, I’m not a psychiatrist. Don’t tell me about your childhood memories when you smell these smells, but I want your emotional reaction to these smells. Do you think the smell fits with citizenM, yes or no?’ It’s very difficult to do but within 20–25 minutes she started to make me smell things that made me say, ‘Yes, this is citizenM!’ Finally, she says, ‘I know what citizenM smells like. It smells like this. Maybe a little lighter.’ All I could say is, ‘Yes, you’re right.’
I think technology is the key to our future. Take the whole online experience. How to make that as easy as possible? I really believe in a one-click booking. That would be fantastic. I could just go to citizenM and click. Don’t worry about payment.
What keeps us focused is staying true to the reason of why we are doing what we’re doing. Don’t deviate from that, because along the path there will be a lot of people who are going to tell you, ‘You can’t do that, you can’t do this, it’s not possible. It’s never been done before.’ But as long as you stay true to what you are trying to accomplish, you will get there.’
Stand out – continuous innovation
We spoke to Lennert de Jong, citizenCommercial.
Rattan has this vision of changing the industry, it was his sense of purpose that drove us to challenge how the hotel business operates. Our model is anchored in three core pillars: first, the way you construct a hotel, the cost of construction, your carbon footprint while doing it, the amount of ground you ask mother earth to supply to your building all have an impact. We’ve only done modular buildings. For example, in Bankside we had the first plough into the ground in July 2011 and we opened in June 2012. It was a fully finished hotel, on budget and delivered ahead of time. This efficiency creates a saving for the consumer, so for the same amount of money others spend on a budget hotel we can make a luxury hotel.
The second pillar is the labour. Again it’s a consequence. If you construct a smaller building you have less space for an office for the hotel manager, for the assistant hotel manager, for the director of sales, director of marketing, reservations manager, the telephone team. The labour and the third pillar, the way you sell the hotel, work hand in hand.
We said we are going to run it like a Starbucks, whereby the hotel team delivers the experience to the guests. In order to do that we have to be, not the headquarters, but the support office, so what we need is to hire experts who can take away the burden of running the functions from the hotels. By having a hotel team that is purely focused on guest satisfaction you eliminate a lot of duplication.
The fact that you do things smarter in distribution leads to the fact that you have fewer people and lower costs. But the thing that makes us really different is the mentality of our people. Our hotel managers understand most the people component, what makes a good team, what is a bad team and what makes a good interaction with a guest versus a bad interaction with a guest. Our people are available to do everything and anything. They will never say, ‘It’s not my job.’ If you say,’ I want a ticket for the tram,’ or, ‘Can you get me a taxi,’ they will never say, ‘Oh, ask the concierge.’
The check-in at a normal hotel is nothing about providing a service; it is all about performing a process. We give the responsibility for the check-in process to you. The ambassador is standing next to you, he doesn’t have a task to perform; he’s just there to make sure you’re okay and that you’re happy. I think that frequent travellers don’t experience the human touch very often. I travel a lot and I see when people are process oriented, and when people are people oriented. I get irritated when people are just process focused and they don’t look at me like a person, or treat me as an individual.
The third pillar is my area, the distribution cost pillar, or the way we sell. If an operator has a hotel with 200 rooms they start selling a year in advance to reduce their risk, because the main risk with a hotel room is that you don’t sell it. It’s like fruit, if you haven’t sold it in three days it starts to rot; in a hotel it’s more extreme, if you haven’t sold the room today it’s gone, you don’t get the opportunity to sell it again.
So what do hotels do? Let’s say the hotel needs to achieve an average rate of €100 per room per night. They have promised the owners a rate of €100 and an occupancy of 75 per cent. So they start with airline crews; they contract long term with KLM for a very low price, let’s say €60, then they sell to tour operators who contract a year out at a discounted rate also. Let’s say they block a certain percentage of rooms at €70 for the tour operators. Then they approach the corporates; let’s say Microsoft because they are around the corner from the hotel at the airport, and they contract for a certain volume at €90. And then the remainder is filled up with people who they call ‘traditional transient business’. These are customers who make their individual purchase decisions, like you and me; they don’t have a contract, and they go online or they call you directly to ask for a room rate. This is the cherry on the pie; this is where hotels make their money; this individual doesn’t have purchasing power, he or she needs the room on this date and you have one. This is the marketplace that you see on booking.com and others. But in order to achieve your average €100 rate you need to charge this guest €140 to €150. I was checking in to the Novotel in Bankside in London just before we opened. I got a deal for £225 at their friends and family rate. Checking in next to me was a French couple with a child and they were paying £80 in total for the night; so that’s kind of the discrepancy we’re talking about – you pay more the closer you book to the stay.
We said we’re not going to do business with airline crews, we’re not going to do business with tour operators and we’re not going to do fixed corporate rates – for two reasons. First, we did not want to have to compensate for this business by placing more costs on our most desired segment. That is not good for us at citizenM. Second, it’s not good for the people we’re really after, those people that make online purchases. So we took a gamble and said, we can do this, we can live without 50 per cent of the normal hotel business, and just target the other 50 per cent. But we won’t compete at €140 or €150, we start at €100 and we stay in this middle area. We used to call this the ‘affordable luxury gap’; if you look at that area between low quality/low price and high quality/high price, we really want to be delivering higher quality at a lower price. Guess what? This segment is also the most likely to review your performance online, on sites such as TripAdvisor. It also gives us flexibility in managing demand because we are not locked into advance contracts. If demand is very low because of a terrorist attack or a crisis or whatever we can change the rates. On any day we have an answer to the demand that is there; sometimes it’s a lower price, sometimes it’s a higher price.
It is my job to maximize the citizenM proposition and its revenue potential, but I cannot mess it up. What I mean by that is if I charge so much that you have the feeling that you didn’t get a good deal. We have to say, this is the maximum I’m going to charge. There’s an annual convention in Amsterdam in the second week of September and hotels will charge up to €600 or €700. Our rates will go up and down, but not to the extremes you see with a lot of other hotels. With us the swings in Amsterdam are between €89 and €199. At the same time we were one of the first to provide free Wi-Fi and free movies. It is about removing the things that irritate the customers.
The hotel industry has consolidated so much that it seems like every hotel company has eight sub-brands and they are all based around one thing, their loyalty programme. But the game is changing, people no longer rely on the Holiday Inn logo, for example, to know that the hotel is good and of a certain quality – technology enables the customer to see on their phone or device what is a good hotel and what is a bad hotel; I think that this transparency is catching the top five brands with their trousers around their ankles. They have not invested sufficiently in creating a distinctive customer experience, they have not invested in the staff; they’ve invested in a loyalty programme that is costing them a lot of money. I think there is an opportunity for a brand like citizenM. The more transparent and bigger the portals like booking.com and others get, the more helpful it is for us, because they expose everyone who is not delivering the value that we are trying to deliver. That’s where our opportunity lies.