How Do Businesses Use Service Design and Transition
When talking about business success, we often come across the example of Apple and founder Steve Jobs, who built the entire Apple fanbase of loyal users based on customer stickiness. Starting from the iPod, Apple has gradually completed its product ecosystem through highly effective product and service design, from smartphones, tablets, computers, to wearable devices and home commodities such as Apple TV.
Apple users enjoy the comfort of consistent integration among their devices, everything from the user interface, essential apps, to personal tracking statistics on our health.
A typical Apple fan could not think of switching to another Operating System other than the easy-to-use iOS and MacOS ecosystem.
But beyond all the product functionalities, Apple really wins customers or rather users when an iPhone is not only a device but also a fashion accessory, a delight to the fans each season or year, when a new version is released.
Take a closer look into all the businesses in the world around you, and the products and services that you use and consume, and you will see a whole host of other companies that are doing well from implementing customer stickiness.
Amazon takes its Prime subscription and digital assistant Alexa to another level when introducing a network of IoT devices that bring a customized experience to people's homes. Amazon has successfully built highly sticky internal services too, that it has turned into a highly profitable external suite of services through its Amazon Web Services (AWS) business line.
Netflix constantly adds perks and values to its customer journey with the diverse product portfolio and smart recommendation system as highlight in our case study in THE STRATEGY JOURNEY BOOK.
Starbucks rolled out its phone app and rewards program, not only to leverage the customer experience, but also to keep the brand on customers' minds wherever they go. With 20million subscribers as at 2020, this program is growing its partnerships to engage even more followers and subscribers to add to their customer and user journeys in other lifestyle situations beyond coffee and beverages.
These are just some of the prominent examples of how customer stickiness drives ample success for businesses. There are many more examples of customer stickiness winning the game, from emerging start-ups as well as other businesses in different countries and economies outside of the US, who have built innovative and transformative offerings for customers.
As illustrated by the relatively new social media platform TikTok, customer stickiness is at the core of business growth. Sticky brands and services understand customers' latent needs and offer solutions even before customers declare their demands. In fact, they often let the customers speak or listen to the voice of their users when it comes to developing or improving their services. Once customer or user expectations are met and even exceeded, they will keep coming back without a second thought, become loyal, and spread the good word, creating the network effect. That is how stickiness helps increase sales and profits while reducing customer acquisition costs.
So how does a business build customer stickiness to fuel growth?
How do you increase product and service stickiness and then build brand stickiness?
Can you and should you build customer stickiness for internal business services within an enterprise?
THE STRATEGY JOURNEY path... TRANSFORMING OPERATING MODELS WITH SERVICE DESIGN, covered in THE STRATEGY JOURNEY Book (2020), proposes a 5 step method to help you design these sticky services and build stickiness effects that transform how a business operates to increase growth and profitability while building its brand and culture for the long term.
In this Data-Driven Transformation Service Design process, you will learn key data-science and human-centered design techniques, that can be applied and implemented in the Business Operating Model to co-create a new service offering as well as horizontally aligned internal business services, that would serve other business units within the same company. So it goes beyond a normal ideation product design process, that would only be hypothesizing possible business models that might or might not work.
With the completion of a service design using the first 5 steps in the path, there is an actionable service that can then be implemented via an MVP co-creation process known as Operating Model Transformation Design to complete the 10 steps in the full end-to-end Transforming Operating Models with Service Design path.
The full Transforming Operating Models with Service Design path will typically take many months or more… to complete, so to help you get started on your this journey of transformation through service design to build the stickiness effects that will achieve long term business growth and a cohesive culture inside of an enterprise, here are 5 actionable tips from THE STRATEGY JOURNEY Book (see image snapshots below) that we recommend for you to apply:
✅ Customer Stickiness-led Service Design TOP TIP #1:
Focus on understanding the true Customer-User Journey
Not to be confused with the processes or systems in the business that produce a product or deliver a service to the customer (eg. innovation and product design, manufacturing or customer servicing, etc…):
A Customer Journey is the sequence of events and activities that the customer goes through in their journey to solve a problem and achieve a goal for themselves.
Julie Choo
The customer journey is driven by how customers think, act, and behave, and how they want to be served when they are consuming services and products offered by companies. The customer journey is so powerful, it can be the make or break of giant companies, such as how it decided the win of Netflix over Blockbuster over a decade ago.
To develop sticky services, it is vital to map and study the data within the customer journey and/or the user journey. This involves capturing relevant data from customers or users, and about customers or users, as they face challenges and problems in their everyday lives or while using a service. This data enables a business to make decisions on how it will transform how it operates and what it may innovate in the form of new services that are relevant to the customer and their specific problems, and in doing so increase the demand for services and its brand. In servicing true customer needs and desires, through services that meet and exceed their expectations along their customer and/or user journey, that is how you develop stickiness.
In THE STRATEGY JOUREY Book , you'll find 2 fully worked example customer journey maps that describe the true problems and experiences of customers, as well as a case study on how you can use the customer journey mapping exercise to discover new service innovation opportunities based on a genuine data-driven gap in the market.
✅ Customer Stickiness-led Service Design TOP TIP #2:
Switch from measuring Customer Acquisition Costs (CAC) to Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) indicates the expected profit that a business can earn from each customer over the course of their total relationship with the business.
Statistically, acquiring a new customer costs from 5-12 times more than retaining an existing one. Existing customers can also provide the best word-of-mouth marketing for a business as advocates of its great services. While Customer Acquisition Costs (CAC) only measure the campaign-based results from specific marketing and sales activities, CLV allows a business to envision the overall growth in sales in the long term per customer with potential compounding network effects. Aiming for a higher CLV, lengthens how long customers stay with your business and increases potential repeat business or sales, without the seasonal stress of pushing sales and acquiring new customers.
Switching to operate a business based on CLV involves much more than merely changing KPIs and SLAs within its performance measures that make sales and operations staff work harder.
A change in 'culture' is necessary so that all staff begin to operate with a value-driven and service-led mindset, that seeks to lengthen as well as deepen the customer relationship for the long term. This is how changes become embedded across all processes in the Business Operating Model as well as with the customers who are interacting with staff and the product or service itself.
This approach to combine how products and services are not only offered to customers but also developed with the customer and within the customer relationship is how you apply human-centered design at its best. Stickiness goes both ways in how staff think, act and behave as they deliver value added services to customers, which will ultimately influence the relationship to foster customer stickiness in return.
✅ Customer Stickiness-led Service Design TOP TIP #3:
Moving from a Pipe Business (B2C) to a Platform Business (C2C)
A Pipe or Pipeline Business operates based on a linear flow of goods or value-adding activities when the business produces a product and/or service which it tries to sell to customers. The business is the value creator, and customers solely enjoy the value created or delivered. A lot of effort and resources in time and cost, is spent predetermining and then producing what customers need and want, even if they may change their minds or behaviors suddenly. We have witnessed the fall of many Pipe Business models during the COVID-19 pandemic as customers are forced to change their behaviors in how they lived their lives.
In contrast, a Platform Business allows customers to take part in the value creation process on a common platform and consume value-added outcomes from other platform users. Many Platform Businesses offer a marketplace often with multiple channels to support the exchange of value between multiple parties, and received fees in return for their brokerage-based services and they can also push their own products in their own marketplace with economies of scale. The main advantage of a Platform Business is that it puts C ustomer Co-creation at the core of its strategies to stimulate exponential growth as demand and supply for different goods and services change. In co-creating with customers, it also build the customer relationship.
Amazon is a perfect example of how a Platform Business thrives enormously in today's digital age. Amazon offers an ecosystem of different interconnected services and products to customers through the Amazon Marketplace supported by its Alexa service and associated home speakers. Many other businesses especially provider of IoT devices and associated SaaS services connect to the Alexa network and/or Amazon marketplace in order to reach customers and users. Through every connected device and services in this vast ecosystem, Amazon is constantly listening to customers and users, and trying to understand their behaviors.
In THE STRATEGY JOURNEY Book, we outline Amazon's Operating Model and the Service Operating Model of the Alexa Virtual Assistant service in a detailed case study to show you how truly Amazon operates its Platform Business.
There are many lessons to be learned from how Amazon operates its Omni-channel Platform Business that can be transferred into almost every other business, big or small and across all industry domains. Just have a look at how you can transform any small local cafe from a food and beverage shop into a marketplace for many other services from co-working and networking, to advertising and more… (eg. We-work) All you need to do is to connect it to the internet and social media and the possibilities are limitless.
✅ Customer Stickiness-led Service Design TOP TIP #4:
Build sticky user journeys with user experiences that bring value to customers
The user journey is not the same as the customer journey. The user journey is what an individual experiences when they are using a product or service from a provider. It is influenced by the user experience (UX) and whether this meets and exceed their expectations, or not. When expectations are met and exceeded, this leads to repeat use and loyalty as well as advocacy and thus impacts the customer journey and the overall customer experience (CX). The user journey is thus where you implement different tactics to help you drive the customer stickiness.
Amazon's Alexa is a perfect example of a sticky user journey. Alexa can be integrated into almost every smart-home device, giving customers better control of their house while identifying the household needs based on data from household patterns and Prime accounts. The ease of use and time or costs saved from certain devices and/or software services that are integrated with the Alexa Platform, is what makes a product or service sticky. Eg. Once a customer goes to the effort of implementing a new alarm, lighting or heating system in their home and learning to use the app that allows then to control their home utility services, they are unlikely to switch or change easily, thus making these products and services highly sticky.
Many other successful sticky user journeys exist in our everydays lives from our use of social media to how prefer to shop from certain brands despite higher prices, because we value the experiences we received, and we may even become addicted to these experiences (eg. Binge watching of TV series on Netflix).
Stickiness can be built into the user journey through 3 techniques:
- Subscription (that are not annoying). This has become a big trend in the digital economy, where customers pay a fixed price for unlimited access to a set of products/services in a defined length of time. Customers always love getting extra value from their money, thus successful companies with the subscription model always pay attention to both the quality and quantity of their product/service portfolio. Spotify has been doing well with this model, and constantly diversify subscription packages and combine subscriptions with their partners to ensure customers are always getting their money's worth (eg. Any student Spotify subscriber gets a Hulu free subscription).
- Incentives. Vouchers and discount programs are the popular types of incentives that businesses push out to increase customer retention. Starbucks customers love digging exclusive rewards from the Starbucks Rewards membership. Airmiles and supermarket credits are other great examples.
- Relationship. This technique goes to customers' heart and aims to build brand love. A positive relationship entices customers to admire and follow your business even when they do not plan to buy anything from you. This is the case with Apple, where some of its products are be out of reach to low incomes groups, but this does not stop people from aspiring to own or use an Apple iPhone. Many other luxury brands also use this same technique including Louis Vuitton and Ferrari.
✅ Customer Stickiness-led Service Design TOP TIP #5:
Implement stickiness via Customer Co-creation to transform the Business Operating Model
Like all transformations, stickiness between customers and a business's services and its brand takes time through implementation.
Implementation is certainly easier said than done, as companies can apply stickiness incorrectly if they don't focus on the customer journey first and instead treat stickiness application for the sake of just sales and revenue. Certainly, stickiness should not be applied as a marketing quick fix exercise. If it is, then that means that the company is still focused on CAC, not CLV. Annoying service subscriptions where the customers wishes they can unsubscribe or cancel their membership without penalties are examples of poorly implemented stickiness. This was exactly the mistake made by blockbuster, while Netflix introduced other stickiness effects to deliver a better user experience as well as a deeper customer relationship.
Stickiness should be implemented through customer co-creation, where the business is constantly working with customers, to listen to their needs and wants, and developing new and innovate services that meet and exceed their expectations along their problem-based customer journeys.
Amazon's use of listening devices using its Alexa Virtual Assistant services, to monitor the behaviors of customers along their customer journey, with added application of AI to predict buying behaviors, is a highly sophisticated implementation of customer co-creation, that requires huge resources in the Business Operating Model. It's important to point out that this was not achieved overnight and it took more than a decade for Amazon to develop this level of Operating Model maturity.
At the other end of the scale, a small local business may co-create with its customers by implementing a simple a customer survey to gain details on the quality of services as well as capturing other customer suggestions for improvement.
When the business begins to co-create with customers as part of its Business Operating Model, it is operating with human centered design at its core. This means the organizational culture has already shifted. It is also when brand stickiness starts to set-in and take shape.
In THE STRATEGY JOURNEY Book, we highlight 6 different co-creation methods used by different businesses to capture the necessary customer data that will drive how the business changes in its Operating Model in order to deliver new and better services to customers and achieve customer as well as brand stickiness.
It is never too late to start thinking about building customer stickiness and nor is it difficult if you are using a simple customer survey, to help you begin this journey of listening to customers and users, to serve them better and build a true relationship, as part of the overall Data-Driven Transformation Service Design process.
Just start with Customer Journey Mapping accompanying you in the very first step of that pursuit, and add additional co-creation techniques organically as your customer base and stickiness begins to grow… Always keep going with a mindset that following these three Strategy Journey Principles… to be:
- Problem-specific
- Service-led
- Value-driven
How Do Businesses Use Service Design and Transition
Source: https://strategyjourney.com/how-to-fuel-business-growth-through-customer-stickiness-led-service-design-5-actionable-tips/
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