Customerland
Customerland is a podcast about …. Customers. How to get more of them. How to keep them. What makes them tick. We talk to the experts, the technologies and occasionally, actual people – you know, customers – to find out what they’re all about.So if you’re a CX pro, a loyalty marketer, a brand owner, an agency planner … if you’re a CRM & personalization geek, if you’re a customer service / CSAT / NPS nerd – you finally have a home.
Customerland
Optimizing the Leaky Bucket: Customer Retention in Uncertain Times
The emotional drivers behind purchasing decisions are often more powerful than traditional demographic factors—this revelation sits at the heart of our conversation with Calvin Cheng, Partner at West Monroe. Calvin reveals how two individuals with identical demographic profiles can make completely different purchasing choices based on psychological factors stemming from upbringing, values, and personal history.
During economic uncertainty, savvy organizations focus on "fixing the leaky bucket" rather than making substantial new investments. Calvin explains that identifying where leads are being lost in the sales funnel and addressing conversion gaps becomes critical when budgets tighten. Equally important is delivering experiences that retain existing customers, as losing them to competitors during challenging times can be particularly damaging. West Monroe's approach combines an inside-out perspective (breaking down internal data silos) with an outside-in approach (analyzing market trends and evolving customer expectations) to create comprehensive engagement strategies.
The conversation shifts to AI's transformative impact on customer engagement, from personalized marketing messages to dynamic product pages and enhanced customer service. Calvin highlights the emerging potential of agentic AI, which combines reasoning engines with generative capabilities to analyze data and make contextual decisions. However, he emphasizes the importance of human oversight—the "human-in-the-loop" model—to ensure accuracy, compliance, and trust in AI outputs. As Calvin wisely notes, borrowing from Spider-Man: "With great power comes great responsibility." The recent Air Canada chatbot controversy serves as a cautionary tale about proper AI implementation. By focusing on emotional drivers while thoughtfully implementing technology, businesses can create customer experiences that drive meaningful engagement and lasting value. Ready to transform your approach to customer experience? Subscribe now for more insights from industry experts who are reshaping the customer engagement landscape.
What we're increasingly finding is that there are other emotional and psychological drivers that oftentimes should be included as part of personalization and segmentation analysis, because Alvin may have the same demographic information as a colleague of his same socioeconomic status, maybe I live in the same zip code, my household family size is about the same, but the decision-making process for buying, for making purchases, can be fundamentally different, based on how I was raised, my family values and things of that nature.
Speaker 2:Today on Customer Land, calvin Cheng, who is a partner at West Monroe. And just to set a little context here, this is our second attempt at this conversation. The first time we had technical difficulties, which really was a shame because it was a brilliant, if I may say so, conversation. But I'm welcoming Calvin back to the virtual studio. Thanks for joining me, thank you, mike, and I'm always happy.
Speaker 1:back to the virtual studio. Thanks for joining me. Thank you, mike, and I'm always happy to talk with you. We'll capture lightning in a bottle again today as we take two.
Speaker 2:Yeah, you know the odds are not with us, except for we're two brilliant people. So you know we got that going for us. Work with what you got. We'll roll with that, right, I'm glad you didn't wave me off on that one. All right, I'm glad you didn't wave me off on that one, so you know because you and I kind of know each other now and have some context.
Speaker 1:Our listeners don't, so maybe just let's set that up a little bit. What is West Monroe? What do you do there and kind of what brought you to this place? Certainly Mike Well, west Monroe. We are a consulting firm headquartered in Chicago. We were founded 23 years ago. We have about 2,000 consultants and we are spread across nine offices in the US and one in London. For our clients, we serve them across a wide range of industry verticals, ranging from consumer industrial products to financial services, energy and utilities, healthcare, life sciences, insurance, high-tech and software, and then also private equity. We do a lot of work with private equity. Generally, our clients are in the upper middle market and we help them achieve digital transformation, and we're always looking for ways to help our clients achieve measurable business outcomes. We're always outcomes focused and we'd like to help our clients operationalize our recommendations and execute them to to completion so me I I sure that sounds easy enough, like who?
Speaker 2:who couldn't do that? Easy enough Right? Anybody can do that, that's right.
Speaker 1:Easier said than done, as usual For me. In particular, I sit within the part of digital customer experience, customer acquisition, digital marketing, e-commerce, omni-channel experiences and things of that nature, all with the intention of increasing customer acquisition, customer retention and customer lifetime value.
Speaker 2:Which is why there's so much to talk about. I mean, in one sense, it really is a shame that we had technical difficulties on the last conversation, because it was a great conversation. On the other hand, I know we finished that conversation by saying there is so much more to talk about here. Indeed, I know We'll recap a little overlap of what customer land is all about, like, literally, it's end-to-end customer engagement, what goes into it, how to build lifetime value across all of the different touch points. So, um, you know, the big difference here is, I watch from the sidelines, you actually do the work, so that's that's what makes this interesting for me.
Speaker 2:But you mentioned a couple of things I think are worth just talking about real quick here. One is that West Monroe, uh, at least for the private equity part of your work, focuses on, um, the upper middle market. Um, and I'd like to just talk that through a little bit because, um, what's changed since our last conversation was the economic environment, um, fairly significantly, and it seems to me that the sector that west monroe focuses on, depending on the industry, was hit particularly hard. You know there are some behemoths out there that have the wherewithal to weather these kinds of storms. Yeah, everybody's kind of moaning a little bit about it. But there are other kind of layers, strata, in those sectors that are really, you know, feeling the crunch. What's your view? Like you talk to these people, what are they thinking and feeling out there?
Speaker 1:Yeah, you're right on it, Mike, and certainly the economic environment is changing and there's a lot of geopolitical activity going on and that is impacting, I would say, a lot of our clients in industry sectors that are particularly dependent upon physical supply chain.
Speaker 1:So for those industries like in manufacturing, distribution, retail, things of that nature they are getting more hesitant on understanding and making bets on where they want to invest into people, process and technology, and they are shying away from investments into growth. Normally, we like to see our clients having a growth mindset and looking to find new ways to acquire customers with new and engaging personalized experiences. I think for those sectors that are dependent upon physical supply chains, they are now looking at more cost containment and protection measures, and so now it's really around optimizing and getting more out of existing investments. Now, that being said, for other industries that are maybe less dependent upon physical supply chains I'm thinking about our clients in the high-tech and software space, insurance, some of the financial services clients that we have, and some parts of our healthcare practice as well they're still doing quite well and we will weather the conditions as they come and we'll be working with our clients side by side along the way.
Speaker 2:You know I've heard this from a lot of different kind of points in my universe lately, but it makes sense to kind of pull back in on your future looking investments and really focus on efficiencies internally, which it would seem, would be a great opportunity for people like you and Wes Monroe who are really focused on optimizing kind of customer flow right now. Right now, it would seem that those conversations would be easier to have because these aren't really you know, these aren't giant tech investments at this point. This is really about, like you know, we've got people, processes and technologies in-house already. How do we make the most of them? Is that what you're seeing, or is that what you're anticipating seeing, or am I just imagining?
Speaker 1:that You're right on it, mike. I think, in the spirit of optimization, particularly with our leaders in commercial functions, marketing and sales in particular, there's always a renewed focus on fixing the leaky bucket, if you will. Where are you losing leads? Where are you losing leads? Where are you losing opportunities to convert sales? And so it's really around closing and finding and addressing the leaks in the funnel and then simultaneously making sure that the experiences that are being delivered and the people and processes within the enterprise are doing the very best that they can to retain the existing customer base.
Speaker 1:What you don't want to do in times of uncertainty is have your customer base churn to a competitor, and so if and where there are customer service issues or if there's complaints, you want to be able to address them and remediate them very quickly. You also want to be able to provide a nurturing type campaign where you can keep existing customers engaged with the brand, whether or not it's a direct-to-consumer or B2C brand, where you want to find creative, relevant, personalized ways to keep customers engaged. Finding ways to make replenishment orders more easy and seamless, making recommendations on other products and services more relevant, and so those are creative ways where the overall experience across all the different touch points within the customer lifecycle and customer journey can lend themselves to optimization areas for customer retention, even during times of uncertainty.
Speaker 2:I think you just opened the door to exactly where I was hoping to go with this, which is kind of a broader view of what CX means operationally, how you specifically and West Monroe go about deriving value from that. It's a big conversation Within the CX space itself. There is loud debate on what CX really means. You can get really esoteric about a lot of this stuff, but, um, at the end of the day, especially right now, cx needs to mean some kind of bottom line effect and, um, you know, again, the definitions of it can can vary depending on who you're talking to. But, uh, an end-to-end view almost seems to me like it doesn't even mean cx anymore. But we might as well just use the label. It's more about customer optimization, which doesn't really have an acronym right now. Maybe we'll work on that on this call. But can you talk a little bit about how you go about looking at the kind of whole thing systemically, like what's your perspective? Because I think that would be really instructive to people who are listening.
Speaker 1:Yeah, for sure, I think, not only for me but my team and our teams at West Monroe, when we advise our clients, we always want to take a human-centered approach.
Speaker 1:In terms of advising our clients, we want to be empathetic to end users and whether or not those end users are consumers or customers experiencing the brand on a website or a mobile app, or if they're in a physical store, or even if they are B2B customers that are interacting with sales agents and account-based teams that are trying to serve me as an enterprise, we always try to take a human-centered approach, to understand what are the expectations, the psychological drivers for buying decisions by end consumers and customers, as well as taking into account the employee experience, for those employees that are delivering those experiences, that are interacting with those customers along the way.
Speaker 1:And so I think, if we take into account the dimensions of the intersection between customer experience with the employee experience and then extend that across the entire customer journey, from awareness and acquisition all the way to conversion and retention, that gives a glimpse into how it is our Westman O teams look at customer extension, customer experience across the breadth of types of interactions and touch points, as well as the depth required to cohesively bring together your people, process, technology and data so that employees are able to give the best experience they can to customers. And in the instances where the customer is interacting with the brand digitally or maybe through a self-service model, they're also getting the very best experience that they can as well.
Speaker 2:As you know I'm sure better than most people you know moving people through funnels and processes are, those are basically activity checkpoints. Um, the emotional factors that either drive people through those checkpoints or are kind of combined into what, whatever they might be considering, kind of their own consideration factors, can be really hard to discern. You just can't ask somebody what they're feeling at any given moment and expect a straight answer, because people, we are not wired to do that. So how does how does West Monroe go about discerning what those kind of emotional drivers are along the way? What those kind of emotional drivers are along the way? And if this is secret sauce that you can't tell me, I understand it. But it's really valuable out in the real world because I think a lot of people struggle with that.
Speaker 1:Certainly it's not secret sauce and, like many things, I can tell you the recipe. But the way you execute and create the dish will be up to every team and every client and it'll be a unique blend. So the way that our teams at the firm advise our clients in this is what I like to call the inside-out and outside-in approach, and what I mean by that is by taking an inside-out approach. Many times we will take a look at the existing enterprise data within the four walls of the enterprise that describe customer behavior, order history, transaction history, and this is where we begin helping an organization break down the silos of internal data repositories that are more oftentimes aligned to how departmental teams are structured. So, for example, the marketing team may only have a fraction of the full customer profile because they're only looking at acquisition costs, campaign performance and things of that nature, whereas sales teams are only looking at the sales conversion and the order transactions and the upsell cross-sell behaviors based on transaction data and the upsell cross-sell behaviors based on transaction data. And then service teams are generally looking at another fraction of the customer profile based on service incidents, ticket resolution, time average, handle time, things of that nature, and what we like to do is take a comprehensive view of all of those components around customer to get a better picture from the inside out around how customers are behaving and how they have performed, looking at historical transactions. That's the inside perspective. The outside perspective, I think, is what you're alluding to, which is we also want to help our clients skate to where the puck is going by looking at transaction data that's based on historical information. But we also want to help our clients skate to where the puck is going by looking at transaction data that's based on historical information. But we also want to bring into our clients' purview a perspective on where is the market going, where are your competitors making investments, what are the changing expectations of your target audience in relation to not only the products and services you have for them today, but also where you are planning to make investments in the future?
Speaker 1:And part of the psychological and emotional drivers that you described, I think, are becoming more and more important as brands, large and small, are continually challenged to deliver personalized and increasingly individualized marketing messages, customer experiences along the way, and so we are finding that, in addition to what I'll call traditional customer segmentation data, what is your zip code, what is your purchase history. What are things that you bought in the past? What is your average order value? What is your socioeconomic status All of these segmentation characteristics.
Speaker 1:They still remain important, but what we're increasingly finding is that there are other emotional and psychological drivers that oftentimes should be included as part of personalization and segmentation analysis, because Alvin may have the same demographic information as a colleague of his same socioeconomic status maybe I live in the same zip code, my household family size is about the same, but the decision-making process for making purchases can be fundamentally different based on how I was raised, my family values and things of that nature, and so sometimes we find that with our clients, there's a limitation to how insightful classic customer segmentation can be, and unlocking the psychological drivers brings to a new level the capabilities for teams to personalize and create new relevant customer experiences that are engaging, that best meet all of those dimensions in aggregate In our work, our advisory work, we found the same thing.
Speaker 2:We tend to approach the outside in starting with, then emotionality what are the emotional components of that? And it's really an interesting process, not only because of what we find throughout. But talking to our clients about this seems to be a complete paradigm shift for a lot of them, who are so kind of milestone or activity focused that those are the things that move processes and purchases forward, move processes and purchases forward. And a lot of times there's something of a I won't call it a battle, but a discussion that has to happen about the idea that these purchase decisions and all the considerations that go into them are first emotional and it takes a while often for light bulbs to go off, but once they do, you know, all kinds of other puzzle pieces start to fit into place. I mean, we do I don't know if I mentioned this in our last call, but we've worked with a handful of companies to produce we call them expectation audits, where we will evaluate consumer expectations within a category in order to establish an ideal and then measure individual brands up against that ideal and you can see where the deltas are for each emotional driver.
Speaker 2:And, yes, it's just fascinating to see that, but again light bulbs go off. Other interesting thing, though yes, it's just fascinating to see that, Um, but again light bulbs go off. Other interesting thing, though, is that, as we've done these things, um, we'll always ask the executives in the room, like, what are the biggest factors in a purchase of your? And these are, these are smart, informed people, but nobody ever gets it right. It's because you need you need to dig into you know what people, but nobody ever gets it right. It's because you need to dig into what's happening in the cranium of your collective customer source.
Speaker 1:So, yeah, we're both nodding.
Speaker 2:It's an audio medium, but you can see we're both kind of nodding to each other, like this is where it's at Super interesting. This is where it's at Super interesting. I think I'd be remiss if we didn't talk about the impact of AI on our respective worlds right now conversation, because I know you've got you've got your perspective and you've probably got yourself shoulder deep in a handful of AI driven initiatives right now. But you know as, at least as it relates to customer engagement, I'd love to just open it up and say, Calvin, what are your thoughts?
Speaker 1:Okay, well, with that, with that, with that setting of the table there, mike, I would say that for sure we can't have a conversation, uh, in this day and age, without talking about ai. To some extent, I would say that, um, as as crazy as it sounds, generative ai, having been around for three years, is already pretty, pretty well established as a man as a way for brands to begin personalizing customer experiences at scale by creating more and more marketing messages, by being embedded into customer service activities, and so this idea of using large language models to understand expectations for personalized marketing messages is becoming more and more prevalent. We're finding this for marketing automation platforms, for email campaigns. We're finding ways for generative AI to be more dynamically creating product detail pages on websites, and I was even talking with some product information management platforms recently, where generative AI is now becoming a way for brands to more rapidly and more rapidly find ways to define the product attributes within their product catalog, whereas previously they had to be manually scraped or entered and then normalized. So there are a lot of ways on the front office for generative AI to bring content more dynamically and more efficiently to the customer experience.
Speaker 1:On the customer service side, same thing.
Speaker 1:We're finding that generative AI is able to be an important medium for addressing frequently asked questions, customer service complaints or inquiries, and these are contextually providing the right answers for those incidents and then taking the load off of the human agents that are also available for when situations are more complex.
Speaker 1:What's interesting as well is beyond the creative aspect of generative AI. I feel like in this year in particular, the rise of agentic AI is also beginning to take the forefront, and platforms like Salesforce and others are talking about their agentic AI capabilities, and for me, I'm very excited about this space because of the introduction of more the reasoning engines for actually not only analyzing vast amounts of data to contextualize the decisions that the reasoning engine that needs to get trained, by the way, needs to be able to quickly move through, but then those decisions from the reasoning engine are then the inputs into the generative AI models to action based on the decisions from that reasoning engine. So the feedback loop for inbound information through the reasoning engine and then using generative AI to create the content or the outcomes is becoming more and more exciting, and we're getting a lot of requests from our clients to help them begin to harness that more effectively.
Speaker 2:That's really interesting. I talked to a handful of people in fact just recently who were really excited about the potential for agentic AI in their space but expressed extreme hesitation with the idea, just because I think in this one person's experience they're still having issues with gen AI accuracy and not so much bias. I think that's kind of a dealt with largely. But you know there were some real genuine accuracy issue, issues in output and when the idea was brought up like hey, listen, once we can build systems that are interoperable and interactive with each other, you know it unlocks all kinds of efficiency possibilities. But all this person could think about was well, look, if my basic gen AI can't get the problems right and I'm going to send this out to another AI-based system, am I not just compounding the problem potentially exponentially? And you know we all said yes, but those are solvable problems at some point.
Speaker 1:So are you seeing any of?
Speaker 2:that hesitation, or is it basically like let's just run towards it?
Speaker 1:oh, there's certainly healthy skepticism, and rightly so.
Speaker 1:I I think, um one of the ways that we help our clients um address those is that West Monroe is a big proponent of the human in the loop model to help check and help check the outputs from the generative AI models and then help the large language models learn more effectively.
Speaker 1:So we certainly don't want to let generative AI or agentic AI run loose without checks and balances, and I think this model of human in the loop helps those models get trained and to learn faster, and so this idea of being able to have those models learn more quickly to have greater trust. At the end of the day, there needs to be a high level of trust on the outputs from these AI models, and I would say that especially doubly so with increasing regulation and compliance expectations being placed on brands. That adds another layer of complexity for making sure that brands are trusted to deliver uh the outputs and outcomes that are expected. And I think one of the examples uh that that did hit the news unfortunately it was the air Canada example of where their gender, uh their generative AI chat bot made promises that uh that the brand couldn't keep and they they found themselves in legal trouble.
Speaker 1:So I think there's another example of where, yes, the capability is there, but kind of like Uncle Ben and Spider-Man, with great power comes great responsibility, and there is a responsibility to make sure that there's training and some verification along the way.
Speaker 2:Props to getting the superhero reference into the conversation.
Speaker 1:I do what.
Speaker 2:I can getting the superhero reference into the conversation. I do what I can. Um, you know I've got a. I've got a, an extensive list of notes I've been making here as well, as I start off with a, with a whole kind of a compendium, if you will, of topics that I think would be really healthy to talk through from your standpoint. On the other hand, I kind of feel like the smartest thing to do here would be to book each other on another series of sessions and we can kind of approach each one of those topics one by one rather than like load it all into one enchilada here. So, if you're good with that, I just want to thank you for the time and and dealing with the technology ridiculousness and the schedules.
Speaker 1:Mike, it's always great talking with you, and if we get to share enchiladas together in the form of more conversation and maybe even real enchiladas, that would be great.
