Businesses across industries can mine significant value from collecting, analyzing and leveraging customer feedback and data. Not only will leveraging this Big Data help businesses better understand and respond to current trends, but it also will empower executives to better predict future behaviors, leading to better business decisions and improved bottom-line results.
In his new book, Innovating Analytics, ForeSee President and CEO Larry Freed shares insights around how companies can boost customer satisfaction and connect the omnichannel shopping experience to company-wide growth.
Retail TouchPoints had the chance to chat with Freed to dive deeper into the key takeaways and best practices shared in his new book.
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RTP: What was your inspiration behind Innovating Analytics?
Freed: There’s really a couple of things that caused me to go forward and write the book. the first is my belief that you can truly gain a competitive advantage today by having great analytics. When I step back and think about which companies are going to be successful and which will fail, you either have great product, great price or great value or service. Everyone takes a different strategy to be successful — and there’s not really a right or wrong answer. Some companies focus on low costs, while others go for high service.
But great analytics can help you make better decisions. And, to an extent, it can be a sustainable advantage because if you build a discipline and continue to innovate and improve analytics, it allows you to continue to have that advantage.
The second thing that inspired me to do the book was the Net Promoter Score (NPS). There are a lot of positive things you can say about it, but there also are some challenges around it. We think it has outlived its usefulness to an extent because it’s somewhat of a flawed metric.
So in the beginning we asked ourselves: Is there a way to make this better? Or is there a way to innovate on this concept of word-of-mouth and better measure it? That’s how we came up with the Word-of-Mouth Index (WOMI).
Those were the two driving forces behind the book.
RTP: Why is word-of-mouth and the Word-of-Mouth Index so valuable to retailers?
Freed: There is two kinds of word-of-mouth: Positive and negative. But there’s also a lot of people in between who are very passive. The NPS only measures from passive to positive, or very unlikely to recommend or very likely to recommend. We know that negative word-of-mouth can be disastrous and NPS makes an assumption that if you’re not positive you’re negative. But our data emphasizes that that’s not true.
We wanted to provide more clarity into understanding positive and negative word-of-mouth because if you really understand who the “discouragers” are, you can figure out what you’re doing wrong. Once you find that out, you can address it. Otherwise, you’re just left being reactive. But it is much better to be proactive and the WOMI allows you to do that.
A lot of people implement analytics and they end up being very reactive. For example, they may look at a comment someone left online, then address it. There’s nothing wrong with that, but it’s a one-by-one approach so you’re always chasing your tail; you’re never getting in front of it.
Instead of trying to fix the problems after the fact, let’s try and be strategic and fix the problems before they even happen.
RTP: What is the key pain point for retailers when it comes to analytics?
Freed: When I think of the struggles, I think of a couple of things:
1. Siloed analytics, or sub-optimization within a channel: For example, if I only focus on conversion rates for my web site and only sell certain products there, I may be doing it at the detriment to the overall brand image. Keeping the perspective of the overall brand and its promise or expectation is very important. I don’t think a retailer wants a web or store expectation. They want a brand expectation, and your analytics have to support that.
2. Chasing feedback instead of proactively measuring and making strategic decisions: When I think of analytics, I think of the behavioral data. Then there’s behavioral feedback, which is the squeaky wheel. The consumer is opting in and is incredibly biased. The feedback is either very positive or very negative, and almost nobody in between is represented. The reality is most businesses are driven by that silent majority in between. You never see a post on Twitter that says “I went to a store and the product selection was okay.” It’s either great or horrible. I want to measure the entire audience or total customer base. I want to get the people not giving feedback, as well as those who are giving feedback. Then, I’m able to get strategic.
RTP: What research or examples are you providing to confirm the importance of analytics:
Freed: There’s a lot of data behind the WOMI. We acquired 1.6 million survey responses across 275 companies. We tested the concept out through some of our clients, as well as the biggest brands and retailers, and used that research to really help us hone in on the WOMI and the benefits you can see. We talk a lot about the research and then we go through a few case studies of how companies are using the WOMI, and the results they expect. Then finally, we discuss the importance of analytics and what can help drive the business forward.
Just about any business wants to increase the velocity of revenue growth. How do you do that? Keep current customers, sell more to existing customers, and acquire new customers, and all components are driven by the customer experience. We also try to explain how this should fit into the bigger context of how companies are currently doing and should be doing business.
We looked at 100 largest brands and based that on the Interbrand 100, which spans across all kinds of companies and even government agencies.
The beauty of WOMI and customer experience analytics is it really applies across every industry, from health care to insurance, financial services, consumer product companies, non-profits and retail. The reality is there’s some basic concepts of any relationship a company has with a consumer, and that’s the fact that the experience determines what a customer is going to do next. The experience includes the price, product and value of services.
RTP: Are there any final best practices you wanted to share based on findings from your book?
Freed: There are a few rules to live by that I want to share:
1. You can’t manage what you don’t measure
2. You can’t improve upon it unless you don’t measure it.
Measurement is so key and then when we think about it what’s the most important asset retailers have? Their customers. They may have a great brand and great products, associates and locations. but the most important asset is their customers, so we want to make sure we’re measuring them.
A satisfied customer is an asset and a dissatisfied customer is a liability. With WOM it magnifies both of those. At the end of the day, the one opportunity retailers have to really win in this ultra competitive environment is providing the best possible experience. Analytics is the way to get there.
