Transcript
Jason Randall [00:01]
Some leaders treat customer experience as a satisfaction score, a number you check after the fact. The better way to see it is as a financial signal in disguise. Long before churn shows up in the numbers, the experience that won your first customers starts to thin out, and it shows up as cost before it shows up as lost revenue. This is the second attribute in the 3 C's framework: clarity, customer experience, and culture, and the consequences that follow when each one breaks: chaos, costs, and churn. Last episode, we covered clarity. Today, the focus is on customer experience, and why customer experience rarely fails loudly until it is expensive to fix. So returning today to share her expert perspective is Questco's Chief Product Officer, Kim Diorio. Kim, welcome back to the conversation.
Kim Diorio [00:56]
Thank you, Jason.
Jason Randall [00:58]
Before we get started on the substance today, you have a really rich and interesting background that I think informs this discussion. I was hoping you could share a little about your customer experience background with our audience.
Kim Diorio [01:10]
Sure. This is actually one of my favorite topics, because I've had the good fortune of leading a customer experience team and designing the customer experience for a boutique PEO. And at one of the major PEOs in the country, I got to lead the transformation of customer experience, and most recently the buying experience. We'll talk about that, but I think of it as an extension of, or the first part of, the customer journey and customer experience.
Jason Randall [01:40]
So you speak from a deep well of lived behavior. You've been in this world, you've fought to improve and enhance this metric. There's a lot of really exciting substance to dig into today. So let's get started. Many people hear about customer experience and picture a customer satisfaction score, or maybe a net promoter score, an NPS number. What do you mean by customer experience in this framework?
Kim Diorio [02:06]
To me, as you said, many people think of it as a number or a metric. But in my mind, it's the full customer journey. You have somebody who is a consumer of services, solutions, and value, and the customer journey is what they go through to consume that value. It runs from the time they are introduced to your organization, through your buying process, whatever that may look like, all the way through to graduation.
Jason Randall [02:35]
It strikes me that it requires deep commitment and curiosity to really unpack this. It's not just a score. The score is the outcome of a whole set of things that we need to look past and dissect and fully understand to really get to the bottom of what this is, why it matters, and how to improve its outcomes. So you say the experience spans the whole journey, how customers buy and how they own, not just the initial impression or the occasional support ticket. Why does this distinction matter for a growing company?
Kim Diorio [03:11]
It matters because it is the best leading indicator of business value, in terms of the value you're transmitting as well as the value of the business itself. It's what drives retention of a customer or attrition, your pricing power, and ultimately your cost to serve, because the experience you're delivering has a certain cost associated with it, in terms of achieving the quality you want to provide.
Jason Randall [03:38]
You're going somewhere really insightful, because I think you're drawing a distinction between a customer who is satisfied and one who is creating value for the business. So what is that difference?
Kim Diorio [03:50]
So they go hand in hand. The customer who's satisfied is likely to create the most value for the business. They give you the most goodwill. They're willing to partner with you when things go sideways a bit, which they always do. They're willing to work with you and give you ideas on how to make your business better and their experience better. But they're also the ones who are more likely to buy more services, offerings, and products, to stick with you, and to refer other customers. So that satisfied customer is the one delivering value in multiple ways, staying for the longest period of time, with the largest lifetime value. It translates in many, many ways to both the top line and the bottom line of the business.
Jason Randall [04:41]
So I'm noticing something thematic here, which is that every time, you're tying this ephemeral notion of satisfaction to something very concrete and specific around economics. This is not just a feel-good score, or something esoteric. It's a core metric, because there's an economic value to the business in having satisfied customers.
Kim Diorio [05:03]
Yes, very much so.
Jason Randall [05:05]
Well, then let's get into it. That's what it is, and to an extent why it's important. But talk about what happens as a company grows. What's the force of gravity on the customer experience? You've observed that customer experience can start to slip just when a company is growing fast and things are going well, maybe even going well economically. Why is growth an inflection point that can lead to the deterioration of the customer experience?
Kim Diorio [05:36]
It happens for a couple of reasons. One ties back to what we spoke about last time with clarity. When you're just starting out, with a founder or even a leader, but with a team that isn't in high-growth mode, you're much closer to that customer. It's the same with the customer experience. You usually have a smaller team that understands what matters most, the value you deliver, and who the customer is, and that team is creating the experience. It's usually higher touch and more personalized. When you start to grow fast, you're bringing on customers faster than you can fill the capacity, the knowledgeable capacity, the team members who understand what that journey is supposed to look like, what the moments that matter are, what they're supposed to feel like, and how they're supposed to land at each step. So you have a mismatch between the volume and the capacity you have to deliver a consistent experience.
Jason Randall [06:38]
A lot of founders might think, hey, I could just write my cell number on the back of a business card, hand it to the client, tell them to call me if they need anything, and that scratches the itch. I'm still close to them. But what you're pointing out is that there's a structural issue that keeps this from working once you're of a certain size, or growing at a certain rate.
Kim Diorio [06:54]
Yes, because that knowledge is again in one person, or a couple of people, versus built into the system.
Jason Randall [07:03]
Exactly. Now, I've heard you say that companies add customers faster than they add the capacity to serve them. Where does this show up first inside a company?
Kim Diorio [07:17]
It often shows up in the frontline service team, wherever that may be, whether it's an implementation team or the team doing the core delivery. Typically, companies invest in sales first, which is logical. You want to make sure you can generate the volume you expect. But you need, in turn, to have the right balance, and make sure you're hiring the delivery capacity, and hiring them with enough lead time to really ramp them, train them, set the expectations, and help them understand how to deliver according to the requirements of the customer and of your customer journey.
Jason Randall [08:01]
Yeah, I think that happens, investing in sales before investing in the service capacity behind the sales, because that's how budgets are justified. Whether there's a committee approving a budget or not, an owner has to justify things, and investing in sales is oftentimes a prerequisite. What you're rightfully pointing out is that we can't stop the thinking there. We have to think about the follow-on effects and get more curious, more deep. Okay, should we generate this volume? How is that going to affect my business from there? And it sounds like that doesn't happen to the level we wish it would when it comes to the customer experience.
Kim Diorio [08:37]
Yes. And we can also talk later about how you systematize that journey and make it easier to bring on new hires and ramp them faster.
Jason Randall [08:49]
Sure. There's another really interesting aspect of this, in how it might feel as an earlier customer of a business during this period of growth, as more logos start to be added. What happens when the business is preoccupied with chasing new logos and sales growth? What happens to the customers who were already there? What's the risk?
Kim Diorio [09:15]
The risk is that the service they were used to, the personalization they were used to, erodes, and they have a very different experience. The other risk, or signal, is that even with your new customers, there may be a mismatch between what's being sold and what they experience once they've signed the contract.
Jason Randall [09:39]
And an observation I might have is that this can be coincident with other things going on in the company, new leadership, new investment, the hallmarks of what you might need to grow. But then the customers might blame the service deterioration on those issues, when that's nowhere near the root cause. That's just what they can see, that's how it looks, and so it tends to undermine the whole approach of the organization.
Kim Diorio [10:01]
Exactly. And the customers may feel that and be signaling it. It's also often coming from the sales team. And again, the root cause is not a lapse in intent or service itself. It stems from a number of other causes, the lack of systemization, the capacity you have, and the trained capacity.
Jason Randall [10:30]
Yeah. Ultimately, what this conversation is about is helping these folks avoid the unintended consequence. Nobody's intending to alienate current customers or erode the experience. We're talking about the things that naturally happen, and then how to prevent them, or even enhance where you are today. One thing I'd like to ask, as we move into what happens: what are some of the signs we, as leaders, might be overlooking or ignoring before it hits the financial statements? What are the earliest signs that customer experience might be slipping? If I can't see it in my financials and I can't see it in a survey, how do I even know this has happened?
Kim Diorio [11:09]
You'll likely start to see some of it in the sales process, that conversion rates may start to slip. Again, I see the customer experience as inclusive of the buying journey. So that buying experience may be different, and it may be vastly different depending on how quickly you've ramped your sales team. Conversion rates may be dropping, the sales cycle may be extended, because people just aren't converting as effectively, or it's taking longer. And then you'll start to see customer escalations, friction internally, as we talked about a moment ago, with sales starting to complain about the service team and vice versa. They're promising things we can't deliver on, or they're not delivering on what we need them to deliver. And then, later, you'll start to see customers not expanding the products or services they take from you, and not renewing. That's when it really starts to show up on the balance sheet. But when you start to see that friction around expectations, escalations rising, people moving into firefighting mode, those are the early signals that something's amiss.
Jason Randall [12:31]
And it's subtle, to your earlier point. It's quiet. Why is that so dangerous, that it's quiet and not out loud and obvious?
Kim Diorio [12:42]
I think one reason it's quiet is that nobody comes to work wanting to do a poor job. So your employees are often trying to firefight independently and make things right and do right by the customer. And usually things come to a head, or they compound. Only when you start to see it in the real numbers does it become evident that it's a problem.
Jason Randall [13:15]
So, if I'm a devil's advocate here, I'm saying, hey Kim, how do I not overreact to a one-off anecdote, one situation, an odd client complaint? Because it is so quiet and subtle, how do I know something more meaningful might be going on? Do I need to be paranoid, or how do I find that balance?
Kim Diorio [13:35]
I don't think paranoia is necessary. But I would say, segment your customers. Look at who your most loyal customers were before growth started, and stay close to them, hearing from them directly. How are things going? If they start to signal that things aren't quite as they were, that they're slipping, that's an important signal to pay attention to. Likewise, your best performers, stay close to them and get their regular feedback. Ideally, you have a voice of the customer, a listening engine that's pervasive across your entire experience, so you can get not just anecdotes but signals at volume, to understand what's being said in the buying process, why you're losing deals, and why customers are leaving. But in a less mature organization, the people you trusted before, their opinions matter significantly, as much as your new customers. So do new customer surveys and see, are they happy after implementation? Are they happy with their first month or two or three of service? And the same with your new hires. Are they able to deliver what's expected of them?
Jason Randall [15:01]
So there's an implication in what you said, that the frontline employee might see this coming long before leadership does, because they're hearing the anecdotes in real time. Do you suggest an actual mechanism to address this? We need to stay in touch with them, but if we don't have a way to do that systematically, because we just haven't gotten there yet, should we be forming some sort of advisory board, or some other structure, to make sure that feedback gets circulated quickly?
Kim Diorio [15:28]
I personally love the idea of advisory boards. At Questco, we very recently stood up a sales advisory board with a diverse population of our salespeople, our BDMs, to say, what are our prospects telling us? What are you hearing? What's working well, what's not? That signal, from a diverse set of people, new hires, tenured employees, different regions, is a very lightweight way to get the pulse and get real-time feedback. We'll bring things to them and say, we're thinking about making this change, how might it resonate? Will it help you or not? It's a great way, and you get to hear them play off each other in those conversations. You get to hear whether what one person is saying is shared across the team, or whether it's an outlier. The other way is doing surveys. You don't want to over-survey your employees, but a quick pulse on a quarterly basis of what's working well and what's in your way is a good way to get a sense of how things are going. And for customers, I recommend implementing, again, not too many, but a few key surveys at the points that really matter in the journey. One that's more cyclical, and one maybe after implementation, so you're getting that signal at scale.
Jason Randall [17:12]
In organizations where the founder, the leader, the senior-most management might have been more customer-facing in the past, when they start to get these rumblings, should they be reengaging more directly to understand what's going on? Or should we be enforcing delegation and developing listening muscles in a different way?
Kim Diorio [17:33]
I would say it's always useful to stay close to the customer, to be engaging with them and hearing firsthand. But in growth mode, when you really want to get to a system-driven machine, it's hearing it, and then working with the team and the leaders in place to have them also investigate the feedback, get to root cause, and build the systems, working with the customers directly, that will work and scale. So I wouldn't recommend the CEO, the founder, or the owner diving in and suddenly solving the discrete issues in a hand-to-hand way. It's helping the team understand what the problem is, and guiding them to determine the root causes, find the solution, and implement it.
Jason Randall [18:34]
Sure. We'll cover interventions later, but I'd assume another thing you would not recommend is just solving for the problem of the moment. One customer complains, we deal with that customer's complaint, solve it, move on, and we have a big list of other things to do. That is not the process you'd be recommending to deal with customer experience.
Kim Diorio [18:57]
I would say you need both. You need a team focused on the day-to-day operations, making sure the discrete customer issues or concerns are addressed in a timely manner and solved. But also that those are captured in a way that another team, or that same team in a different mode, can work on the business and say, okay, what are the themes we're experiencing? Where are the real thematic pain points in the customer journey? And how do we fix them at a global level, rather than solving them one by one?
Jason Randall [19:36]
Sure. And before we get into solutions, I want to cover some of the consequences. You've been very adept at tying this not just to a score, but to a financial consequence. So I was hoping you could articulate a little more. We know this intuitively, that customers cost more to replace, and so on. But why is the erosion of customer experience itself so expensive, even when the revenue associated with that customer might look fine on the surface?
Kim Diorio [20:02]
A couple of key impacts. One, the lifetime value of that customer goes down. They may be staying in the moment, and the revenue may be fine for the moment, but if you don't get the tenure out of the customer that you otherwise might, that has a significant impact over time. Another is that the cost to serve those customers goes up exponentially. If you're firefighting, if you're solving issues for a material number of customers and having to engage in a different, reactive way, the margin gets diluted. So those are, in my mind, the two biggest impacts, the cost of not paying attention to this.
Jason Randall [20:50]
You have this really interesting concept, that I haven't seen tied together in this way. A lot of people might assume customer experience becomes a retention problem. Or maybe it becomes a margin problem, because you have to give a concession to keep them. Or maybe your cost goes up because they're less happy and you have to improvise a solution, at least in the short term, to make that work. But your argument is that these are all parts of the same challenge. So I was hoping you could walk us through all of the facets, because it's not just any one thing. It's three things working in concert to just hammer the P&L.
Kim Diorio [21:27]
Yes. It's the retention of that customer and the revenue, it's how much you can price, and there's also the goodwill element. Are you getting referrals from the customer? Are you getting their feedback and engagement? So it's really holistic in terms of the impact.
Jason Randall [21:49]
And then there's this durable value concept as well. You mentioned lifetime value. Unpacking that more, it's a little more complex than they'll just leave sooner. Along the way, you're going to have to give more pricing concessions, you're going to have to invest in improvisational service to solve problems, and ultimately they will leave sooner, because you've lost the North Star. So this multifaceted concept means, among other things, that this is a more complicated issue than just attacking it on one dimension.
Kim Diorio [22:23]
It is. And the other piece, we spoke about this with clarity as well, is that if you don't have a customer experience that is systematized, repeatable, and scalable, the business becomes less transferable over time.
Jason Randall [22:38]
Right. It goes right to the heart of what the business is actually worth as an entity. This is not just a short-term P&L issue. So obviously this is a serious issue. It can be an existential issue. And it's one that the forces of growth put into the environment of the business. So what is a great leader to do? I want to leave our audience today with some practical tips. We actually have some material developed as well. When a leader recognizes and sees this in her own business, what should they actually do first, and then next?
Kim Diorio [23:15]
This is my favorite part. First, I would say, map the journey as one journey. Who is the key persona for your particular business, and what are the results you deliver? We talked about that last time. Get really clear on what results your solutions deliver, and what problems they solve. And then, from hello through the entire journey, what are the moments that matter most? What should that feel like for the customer? What results should they get out of it? How should that journey flow? And then figure out from there how you close the promise-to-delivery gaps. What should happen in the moment that matters? What's actually happening today? And how do you build a system that creates the experience that should be happening every single time, during the buying experience and the service experience? So it's really taking a step back and saying, if we look at the best experience we've delivered with our happiest customers, what does that look like, what differentiates it, and what is the exemplar we should build for?
Jason Randall [24:41]
It strikes me that radical honesty and self-awareness are involved to get through that, especially if a company is facing an erosion where they used to be stronger than they are today. Is this something organizations are equipped to do themselves in many cases, or do they need to hire facilitators to walk through the journey? What works best in your experience?
Kim Diorio [25:01]
I think it can be helpful to hire a facilitator. There's value in having an outside party who may not know the business as well. That can be an advantage when they do know it, but also when they don't, because your internal team tends to spend their day-to-day in what you do, and it's hard to put yourself in the customer's shoes and see things through their eyes when you're the expert in your domain. So having a third party who can ask the naive questions can be very helpful, someone skilled in guiding a team through the process. But it's not impossible to do yourself. Especially with the AI tools available now, you can ask AI to write how you would facilitate a customer journey mapping session, and get a pretty decent guide: here's how you bring the team together, here's how you set the stage, here's what you walk through. You can record the session and have it draw journey maps for you and give insights along the way. So if you can afford an expert facilitator, I'd always recommend that. It's very helpful. But I don't think it's out of reach for most.
Kim Diorio [26:38]
Let's take the hats we wear every day off, put ourselves in the customer's shoes, and just walk through, from understanding that the solution exists. How do you find our company, and what does it look like today, from start to finish? And how should it look and feel? I think that's doable, and a highly valuable exercise, because then you can compare it to what you're doing today.
Jason Randall [27:00]
A similar concept around segmentation. You've emphasized that we should segment. If you look at the book of business as a whole, a lot of the detail, the actionable items, get lost in that view. Should we be thinking about segmenting the business in different, novel ways? How do you think about that question in the context of customer experience? What does segmentation mean to you?
Kim Diorio [27:30]
To me, segmentation would mean segment your customers in terms of who's very satisfied today. Then look at the shared characteristics, whether customer characteristics or internal ones, who's supporting them, when they purchased, and so on. Have a cohort of very satisfied customers, a cohort of your most dissatisfied customers, and then maybe the middle. On those very satisfied customers, you can look at who you're maybe underpricing, and where you can perhaps charge more, because you're delivering more value than they're paying for today, and figure out where you can gain traction in terms of revenue. On those who are very dissatisfied, the instinct tends to be, let's discount more. But you're not really solving the problem there. I'd say, understand what the themes are, where service is slipping, and make the service investments you need to make it right, and show them you're making those investments. So, we heard you, we understand you're not getting the results or the experience you expect, and here's what we're doing about it. See if you can work with them, rather than just discounting further, which basically compounds the problem, because you don't have the experience you aspire to, and you're not getting the revenue to support the staffing, capacity, and tools you probably need to deliver that experience.
Jason Randall [29:10]
You're raising this in a very interesting way that I haven't heard discussed before, which is, get paid for the customer service you provide. A high customer satisfaction score could also be a sign that there's some underpricing going on with some segments. Yes, they're delighted, because it's an unbelievable value, and in fact you might be leaving something on the table, and should at least know that. So there's erosion, but there's also a diffusion, a spread of experience. We need to understand that, to know not only where we need to raise our game, but also where we might be giving away the store service-wise, because we're not getting paid for the actual value we're providing. It's a really interesting concept.
Kim Diorio [29:54]
Yes. And there's another way I've seen this show up that's very important. As you start to grow, and the customer experience starts to erode or slip, and your teams start to hear more and more complaints and issues, those become the high-volume signal for them. They start to lose sight of the bright spots. They lose sight of the very happy customers and the value you're delivering day to day. And that translates into a belief challenge. Jason, as chief growth officer, you know that belief and conviction is one of the most critical things in a sales team, out in the market, and in a service team.
Jason Randall [30:40]
And a service team, right? And a company culture, which we'll get into in our next episode. But that's absolutely the case.
Kim Diorio [30:47]
Yes. And so you can start to fall into this habit where the belief becomes, we're not delivering value, we're not delivering the service we should be, so we're overcharging, or we shouldn't be charging. And often there may be some truth to that. But usually people catastrophize a bit, when really, no, you're delivering something amazing in the market, that's why you're growing, and just fine-tuning it is often what needs to be done, rather than throwing the baby out with the bathwater and starting over.
Jason Randall [31:25]
It stands to reason that when I'm proud of the offering my company is providing, whether it's a service level, a product, whatever, I'm therefore more confident asking for the price the company believes it deserves, or defending the price, or supporting the price in a service context. And the converse is also true. This is something you don't see talked about as much, but you're very adept to hit on it here.
Kim Diorio [31:52]
Yes. And again, it becomes a vicious circle. If you're not commanding the price to support the cost to serve of the experience you want to deliver, you compound the problem.
Jason Randall [32:06]
Exactly. So, very consequential, and some very helpful ways to address it. At Questco, we've also produced some material that we hope will be helpful to the community, our Customer Experience Self-Assessment. Kim, I was hoping you could talk about that for a moment.
Kim Diorio [32:22]
Absolutely. So, similar to the Clarity Self-Assessment, this is a five-minute tool to help you understand whether you're seeing the signs in your business that customer experience is eroding, and to help you figure out what to do about it first. There are a number of solutions you can implement. We recommend picking one, starting there, and then making progress.
Jason Randall [32:48]
Well, this is a topic that's relevant and resonant to every business I've ever been even tangentially associated with. I really appreciate the helpful frameworks, the larger framing of what it means to have a customer experience, its deterioration or its enhancement, and some things we can do to help. I appreciate the perspective, Kim. This is, again, a fascinating conversation.
Kim Diorio [33:13]
It's my pleasure.
Jason Randall [33:15]
And to our audience, thank you for tuning in to this episode of Up In Your Business. If this conversation changed how you think about what customer experience is actually worth, please share it with another leader who is watching their support load climb while their renewals get more difficult. You can find the Customer Experience Self-Assessment and more resources in the show notes. Next time, we'll move from how customers feel on the outside to what holds things together on the inside: culture. Thanks so much. We'll talk soon.
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