Customer Experience (Part 1): Yes, it is an Experience

I’ve done a lot of thinking on customer experience lately and have concluded that generally speaking, people do not think enough about goods and services from an experiential perspective.   No matter how medial the product or service, businesses must be thinking about what they are providing as experiences and not just transactions.  I strongly believe that there are lots of opportunities to improve, optimize, and create new markets around customer experience.  This post will be the first of several posts on the topic.

Apologies in advance for the theoretical and pseudo-mathematical approach to the issue in this first post, but in a world where customer experience is bucketed as being touchy-feely, I think it will help to think about it quantitatively to recognize its importance and real business impact.

Customer experience (which is directly related to the probability that a customer will return and retain), is a function of many things. I propose the equation below:

f(ce) = ßp*(p-pe) + ßt*(t-te) + ße*(e-ee) + ßs*(∆s) + ßsth*(∆sth) + ßlth*(∆lth)

OK, I know it’s been a while since we’ve seen equations and most of us can’t even remember what a regression is. But hear me out: What I’m saying here is that customer experience is a function of both measurable objective variables (in red), but also more subjective variables (in blue).  The measurable elements basically are a function of how well the company performs against the consumer’s expectations of what price (p), time spent (t), and effort / convenience (e) should be. Each of these is weighed based on the relative importance (ßp , ßt, ße) for a particular industry or product.  For example, for something like morning coffee, time and convenience might be paramount in experience relative to price (ßt, ße will be high), compared to something like buying a TV, where you might care more about price than convenience.

Whether or not they write it in a regression equation, companies are definitely aware of and differentiate along time, convenience, and price. However, few have succeeded in maximizing for the more subjective variables as well. Here, I have included stress (s), short-term happiness (sth), and long-term happiness (lth). Stress incurred is relatively straight forward—one might rationally choose to buy toilet paper at Walgreens for significantly more than Wal-Mart for example, because the stress of going to the large big box retailer and waiting in line outweighs the price paid. Short term happiness can be characterized simply as the ‘fun’ element, the happiness delivered while in the store, or while purchasing, that is not taken outside of the experience. The fun safety video on Virgin America for example, is such an example. Long term happiness is actual improvement in self-image, or happiness that is taken outside of the experience. For example, finding a pair of jeans that makes you feel great whenever you wear them, or feeling like your purchase has helped the world are feelings that fit into this category.

Let’s try this equation out on a couple of hypothetical purchases. Take, for example coffee and jeans.  I’ve mapped out what relative importance might be for people—people care more about price of the exact same pair of jeans across retailers, while people might not care as much about price of the exact same cup of coffee. Time and effort are however more important for coffee than jeans. Long term happiness is a bigger factor for jeans, while short-term happiness is more important for coffee.

Now, if you assign scores to a number of different ways to purchase the exact same pair of jeans (you can buy at Macy’s with a slight discount, Gilt for a large discount, or at a very hands-on boutique for example), you can come up with an overall score of how customer experiences might vary across ways to purchase for both the jeans and the coffee.

While price, convenience, and time are obvious levers, people make purchase decisions that appear not to be rational on these three categories alone. Why, for example, do people buy jeans from expensive boutiques when they could buy the same items in department stores? Why would people favor an actual Starbucks location to a gas station selling the same Starbucks coffee? Or to brewing it themselves?

In fact, if you look to the second bolded column in this purely hypothetical example, you can see that failing to include subjective elements of customer experience might lead you to vastly different conclusions about customer preferences.

I’m sure my equation is not exhaustive and that there are many nuances along industry and product lines. But I think it  is still effective in illustrating that it is important to think about your business’ customer experience.

What are the variables in your customer experience? What’s important to your customers? How are you making your customers react and feel?  What are you maximizing now and what do you need to pay more attention to?

Humble Reminder that Innovation Can Be Simple [Toilet Paper]

Its been a while since I’ve been inspired for a humble reminder post but this tube-free toilet paper is genius.

Apparently I am slow on the uptake- it had been announced October 2010, but saw this commercial over the weekend.  Really impressed that this was done first by the Scott brand, which I perceived as being a bit on the old, dinosaur end of personal care, especially relative to newer brands like whole foods or method from whom you might expect innovation like this.

My only complaint is that it is only in Costco and Wal-Mart?  Not sure that the commercial, which targets the eco-friendliness of the product is consistent with the market in those distribution channels.  Bring the tube-less to urban convenience stores!

Nevertheless, a very humble reminder that innovation can be simple and common…

e-Commerce: It Shouldn’t Have to Be One-Size-Fits-All

In the brick and mortar world, different stores are merchandised to reach different audiences and satisfy different customer groups.  While a Safeway in California has in stock BBQ coals now, it doesn’t have snow shovels as the Stop and Shops here do.  Apparel retailers similarly adjust by demographic and geography– a Bloomingdales in the suburbs carries different brands than a Bloomingdales in New York City, and a Gap in Minnesota will carry and display more weather-appropriate clothes than a Florida Gap will.

e-Commerce stores actually have MORE information than these brick and mortar stores.  Especially if you are signing-in as returning customer, they know your age, where you live, what you have bought before, and potentially other demographic information as well. Even without a sign-in, e-Commerce stores know at the very least your IP address, which traces to a physical location.

Yet, if you log onto Bloomingdales.com or Gap.com anywhere in the country, you will see a landing page with the same merchandise displayed– a one size fits all approach to the entire universe of online shoppers.  Why aren’t e-Commerce stores differentially merchandising?

Wouldn’t it make sense that younger people see different brands than older people?  That people in perpetually warm climates not be served hat and glove merchandise on the homepage?

Clearly, if the brick and mortar stores are finding it beneficial to customize merchandise, there should be similar benefits to doing it in e-Commerce too.  Have I misjudged what is possible?  Is it too technically difficult?  Is it just not prioritized?  I’m puzzled– anyone know the answer?

Everyday Is an Audition

By nature, we humans are very goal-oriented.  Goals of primal times– to secure food, to reproduce– have grown up into goals– getting that great job title, the next promotion, that ring on the finger.

We celebrate milestones.  Milestones are great measurable, concrete things to work toward on paper.  But the thing about milestones is that they are point-in-time– a highly limited status check in a fleeting moment.

Less measurable and less frequently celebrated is who we are off paper– the ethical decisions we have made, the impression we have made on other people, the level to which people respect and revere us.   However immeasurable these things, I suspect that they are infinitely more meaningful when it comes to happiness and to reaching overall goals of whom we imagine ourselves becoming holistically.

Perhaps its because I recently saw Black Swan (amazing movie, by the way), but I wonder if the analogy is an audition.  Ballet is a beautiful analogy for life in general– requiring grace, composure, skill, endurance, and the ability to enrapture an audience.  An audition in ballet requires not only the physical skill of the role, but also confidence, emotion, attitude, and mental transformation.

Everyday, we should be auditioning for the role of whom we want to someday become.  Maybe you can’t do those 32 fouettés in a row yet, but you can practice one, two, or ten.  Maybe you can’t lead hundreds of people in a C-level role today, but you can practice by acting responsibly, ethically, and commanding respect today.

We can’t all be ballerinas, but we can all be better.  One day at a time.

Whats in a Name? How to Name a Company

Naming something, anything feels personal and critically important. Of course it didn’t matter that amazon was called amazon and not Hudson or nile but it’s somehow impossible to pick something trivial.

As many of you know, I’ve been working on a business the last few months.  We hoped a name would come to us—an epiphany, or a meaningful place or event—but the moment of truth never arrived, and we needed to finally lock down a name.

I couldn’t find many references out there of how to go about doing this (and would appreciate at least for future readers of this post any suggestions). So we kind of winged it, but found it worked well! I don’t mean to suggest that the way we did it was the best way, but thought I would share what we did:

Staging:
- Reserved a room with lots of whiteboard / chalkboard space for 4 hours
- Snacks, beverages
- Invited funny, creative, retail-related, and generally out-of-the-box friends to come by for different time windows for said snacks and beverages

Execution:
The general concept was to put a bunch of words together on the board. We knew we wanted something that was probably going to be 2 words long—something easy to remember but also long / random enough that we can get the domain name.

First, we brainstormed a list of ‘conjuring’ words—guiding words that we associated with our business that we wanted to be associated with our brand.

We then drew columns of several different categories of words outlined below:

• Personal: Here we included personal references— Streets we’d lived on, our last names and the like. Example: onekingslane.com
• Industry: In this case, we were thinking of retail—hanger, closet. etc. Example: hautelook.com
• Adjective: In a 2-word scenario, one was likely to be a descriptor. From colors to feelings, anything that was a descriptive word that we liked was in this category. Example: Bluefly.com
• Literal: Though we didn’t want to have strictly literal names, such as “style in a box,” we did think of words like style, habit, etc. Example: renttherunway.com
• Veto words:  Mostly to guide our friends wandering in and out– words we absolutely didn’t want included.

With our creative, fun, and thoughtful friends, we brainstormed words for each of the categories, and then stared at the board and threw together combinations of words from different columns as potential names. And noodled over snacks. Lots of noodling.

In the end, it was a fun, but also very productive session. We had several finalist names that we considered putting out to a vote, but fell in love with one in particular before we could even set up a poll to vote.

The name we selected… drumroll please… is:

rackhabit

Do you love it? Rack is meant to evoke the rolling in of a rack in a personal shopping experience, and habit is a somewhat literal reference to the service being ongoing and continuous, and almost like a vice, in a good way. Memorable, available, and simple, what more could you want in a man? Or a name, I mean.

More to come soon!

Happy New Year! My self-improvement hopes for 2011…

I was lucky enough to ring in 2011 in beautiful Cape Town, South Africa.  South Africa is another post in and of itself– absolutely gorgeous country, fantastic food, people, wine… an amazing place I can’t wait to return to.

Thinking about the new year in an unfamiliar place with unfamiliar customs, culture and the like led me to think about resolutions that transcend time, culture, and context– easy things universally applicable to any aspect of life from meeting with lawyers to haggling with street vendors.

Full disclosure that this is super cheesy (especially unnatural feeling as I’m donning all black and motorcycle pants posing as a New Yorker this week), but here are some things I’m thinking about in 2011 to improve my life all the time, from touristing to entrepreneuring…

• look nice:  looking frumpy has probably never gotten anyone anywhere.  not a lot of downside to that extra 5 minutes to look presentable and every now and then it pays off.
• be interested:  not everyone is going to be interested in me and my work, but i can always be interested in them.
• be happy:  there’s some very cheesy buddhist saying about one person smiling at a random person, who smiles at another random person, leaving the whole street smiling for no reason– this is pushing the limits of my cheese tolerance, but the point is that i plan to smile more.
• reward real: it’s not always easy to tell the truth, hear the truth, or have honest conversations. here’s to real in 2011.

Yes, this list reads like a cheese platter, but I’m letting myself indulge for now.  Maybe it will get me places in 2011.  Like funded.

Suits to Scrappy: Becoming an Entrepreneur

Corporate, especially client-facing jobs (read: consulting, investment banking, etc), are generally not ideal breeding grounds for entrepreneurship.  However, I would argue that this is a nature (the people joining are risk averse and tend not to want to become entrepreneurs), and not a nurture (consulting doesn’t teach you skills translatable to entrepreneurship) problem.

Looking back, there are a lot of things I learned in consulting that translated to entrepreneurial skills.  Below include mostly generally known best practices– I know that these insights are not novel.  But I thought I’d write them down, for both the benefit of my own career and skill development, but also in case there are any risk-loving wanna-be entrepreneurs out there looking for tips to transition from Bain  & Co to a bootstrappedstartup.com.   I’ve outlined some of what was valuable, and what I left behind of the “toolkit” from my consulting job several years ago…

Keep:

• Cold Calls:  Cold calls were the most unglamorous task, usually reserved for first-years.  I was pretty good at cold calls (not sure if this is a compliment or sexist), and did a LOT of them and got even better.  Who knew– being ok with being hung up on, working through awkward silences, and most of all selling and convincing people to talk has been endlessly valuable.
• Work Plans:  I don’t mean those terrible gant charts with deliverables and deadlines, but the lists that are provided to clients with what you will produce and what activities you will undergo to produce those.  At a macro level, this concept is helpful when proving an idea out; for example, if I can prove these three things, I can show that there is customer demand.  At a micro level, though it feels tedious and micro-manager-ish, making those lists of things you need to accomplish and thinking daily, even weekly, about what you accomplished that day and what you will accomplish the next is a habit worth getting into.
• Back of the Envelope:  The concept of doing a quick calculation to gut-check is beyond important.  I spent a few weeks thinking about an idea that was only going to render $100K in annual revenue in a good scenario.  Probably not a home run, I really should have scrapped that sooner.
• Competitive Analysis:  This is somewhat in the same bucket as cold calls, but understanding what competitors were good at, what they suck at, and what customers think is really important and often overlooked when entrepreneurs get really caught up and excited about their own idea.
• Initiative and leadership: From taking the lead on planning the holiday party to sourcing a pro-bono consulting engagement– anything that you can lead on your own will help accustom you to reporting to yourself, being held accountable for everything and being comfortable doing things ‘in the weeds’ and ‘big picture’ at the same time.
• Camaraderie / Teamwork:  One of the best parts of working in consulting, investment banking, and the like, is that you are working alongside incredibly smart and talented people.  Take this feeling with you.  In your new venture, surround yourself with the best, and consult friends and industry experts when you don’t know what ‘best’ is for that role.   Consulting firms live and die by the quality of their people. So do start-ups.

Toss:

• Focus on presentations:  I have grown to hate powerpoint.  The idea of presenting your idea in a cohesive, organized fashion is important.  But moving graphs around on slides, left aligning bullet points– total waste of time and brain space.  Wait 1-2 months before you make your first slide.  Seriously.  Your idea will iterate, no one will dock you for not having a presentation, and you’ll make a LOT more progress on your real business.
• Market Research:  Not ALL market research, but anything you have to pay for, anything with a CAGR, who cares.  For the most part, we are all working on disruptive, $0B ideas, where IBIS or marketresearch.com is not going to be very helpful.  Of course, this is a brash suggestion, but consulting teaches you to over-focus on market numbers, and most start-ups are addressing industries and inefficiencies that are immeasurable with any accuracy.  Don’t dwell on it.
• Expensing:  This seems obvious; of course there is no free dinner if you stay past 7pm.   But the entire notion of expensing and the entire notion of entitlement based on effort exerted needs to be banished.  You will work all days of the week, you will think about your idea all the time, and you will not get any money, equity, or accumulated vacation to compensate you.  I am lucky to have a couple jobs between consulting and truly starting something; I am embarrassed to say that it was actually surprisingly difficult to ween myself off of the benefits I had become accustomed to, and it took time.
• Notion of a final anything:  Consulting projects are usually aimed toward reaching one conclusion on strategic direction and whatnot.  Pivoting, iterating, A / B testing– it’s a fine line between focus and keeping doors open in a start-up, but definitely not recklessly forging down one path with one final thing.  Don’t be afraid to change your product, and don’t spend time on the last mile of a final ‘anything.’  It’s probably not final anyway.

Though I feel better rationalizing my past choices by writing this out, the conclusion I’ve come to is that both everything and nothing truly prepares you to be an entrepreneur.  What do you think?

Free Business Idea: Virtual Points Exchange

Many sites and web services have discovered that providing redeemable points to customers for use is a way to reward customers for loyalty.  As a result, many of us are accumulating many different types of virtual points that are often exchangeable for physical goods at many different sites.

Points on foursquare or OpenTable,  Facebook credits, chicpoints at Chictopia, and of course all of the virtual currencies of Zynga such as Farmville and Frontierville are among the dozens of points that many of us have accumulated.  But despite the fact that all of these have known value based on either purchasing points or exchanging for real goods or objects, there is no marketplace where one can exchange one currency for another.

There are some people addressing the marketplace for more ubiquitous points– points.com, for example enables a marketplace for airline and hotel points.  This is great, of course for the physical world, but who’s doing this for the virtual world?

Not only would this marketplace be functional, but it may also provide useful information about users and about the status and futures of the currency sites.  For example, fluctuations in the exchange rate between Facebook credits and Foursquare points might say a lot about the respective expected value of those companies.

Does this already exist?  Any volunteers?

Happy Thanksgiving! I’m Thankful for YOU! And for some other stuff…

I love Thanksgiving– food, friends, relaxing, amazing.  First and foremost I am so thankful for all of the amazing friends, family, and mentors in my life.  I’m giving thanks to them 365 days a year these days.  But in the spirit of eating cheese and sheer cheesiness,  I thought I’d share and be thankful for some of my favorite products and resources.  They are listed below in no particular order, and pertaining to no particular aspect of my life.

MBA Mondays on A VC– Fred Wilson of Union Square‘s blog is generally great, but his MBA Monday posts are particularly great.  There are few resources for MBA trying to navigate the start-up and entrepreneurship world and this is one of the best.

AngelList on Twitter– AngelList is a platform that allows entrepreneurs to pitch to a collection of impressive and well-known angels.  To be honest, I haven’t used the core site at all, but I follow the Twitter list which is a compilation of of the angel accounts.  It’s a good source for staying up to date with the industry and is helpful to follow what angels are thinking, doing, and interested in.

Shop.org SmartBrief– A daily newsletter that covers all the goings on in online retail.  I know newsletters are old school but I love having these in my inbox for reading on the go.

Google Voice Calling in GMail– I love all forms of Google Voice (transcribed voicemails hello), but what I love MOST is integration into google chat.  Since all of my contacts are synced to my gmail, I can type a contact and call someone with perfect call quality straight from my laptop.  It’s free, better quality than my phone, and don’t have to worry about unreliable service in my apartment, and amazing.

NVCA Financing Documents–  Looking for a starting place for incorporation docs? Term sheets?  Start here.  Forms put together VC attorneys and are updated to reflect trends.

HBS Startup Tribe– Started by @jbloomgarden and forming up to be a great community and resource for MBA entrepreneurs

Evernote– Cannot. Live. Without.  I use it to tag everything I find on the internet and in the real world and absolutely love how seamlessly it works across mobile, desktop, etc.

Fusion Radio– A Chicago-based radio station that streams the hottest dance hits 24/7.  It gets me through the days, weeks, and especially the mornings.  RIP Energy 92.7

Google everything– I realize it’s not revolutionary so I leave it for last but certainly not least.  I am eternally grateful for all Google products.  My android phone, google voice, google docs– I can’t live, work, or play without it.

And for the record, if Santa and Steve Jobs are reading, I would love to add Facetime on a video-enabled iPad to this list.  Not to be too specific or picky or anything.

But I digress.
Thank you to everyone making and doing stuff to make my life easier and better.
Thank you to all of the amazing people who make my life meaningful and rewarding.

Happy Thanksgiving All!

Women Entrepreneurs in e-Commerce and Fashion: Is it Limiting?

In a women’s tech group discussion the other day, someone voiced a concern that recent women entrepreneurs from HBS (Birch Box, Rent the Runway, Gilt, Fashion Stake to name a few) are concentrated in fashion and retail. Her concern was that this relegates women entrepreneurs to a niche.

It’s an important distinction to make that the reason women are innovating in this space is NOT because it’s ALL we can do, but because there is a legitimate unmet need in the marketplace and real opportunity.

Above is a picture of the women’s locker room at HBS. Clearly, it was designed by men, for men. The top row of lockers requires you to be 5’10 to reach, there are no hooks in the lockers to hang hair ties or jewelry– this place was NOT designed by someone who understands the end customer.

Similarly, ecommerce is not optimally designed for the way that women shop. It is immensely brand-centric. You search by brand, filter by brand; there is virtually no discovery. This is how men shop. Men go to the mall targeted. They have one or at most two stores in mind, and specific things they want to buy. Women shop very differently– they enjoy discovery, they browse more, and the online world isn’t optimized for them. All of these HBS start-ups have helped this problem in different ways– Fashion Stake enables women to discover new brands first, Rent the Runway enables better brand discovery and trial, and Gilt encourages women to try new brands through great deals. All of these have innovated e-commerce to move away from the targeted, brand-centric way men shop and helped it to better resemble the way women shop, improving the customer experience and creating more value for brands online.

So please don’t assume that women who are innovating in retail and e-commerce are doing it because it’s all we know. It’s the result of seeing true opportunity to introduce disruptive business models and enable a more effective and higher value consumer experience.