Ep. 229 – Jon Picoult – Tactical Ways to Build Credibility for Personal and Business Success

My guest today is Jon Picoult, Founder and Principal of Watermark Consulting. Founded in 2008, Watermark Consulting offers consulting services to top brands around improving customer experience. Prior to founding Watermark Consulting, Jon served in leadership roles at both MassMutual Financial Group and American International Group. He holds a degree in Cognitive Science from Princeton University and an MBA from Duke University. 

Find Jon Online:

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Website: watermarkconsult.net

CX ROI Study: watermarkconsult.net/cx-roi

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Website: happymr.com

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This episode is brought to you by HubUx. HubUx reduces project management costs by 90%. Think of HubUx as your personal AI project manager, taking care of all your recruitment and interview coordination needs in the background. The platform connects you with the right providers and sample based on your research and project needs. For more information, please visit HubUx.com.


[00:00]

On Episode 229, I’m interviewing Jon Picoult, founder and principal of Watermark Consulting. I’ve got to say this is a marquee episode for Happy Market Research podcast. I have referenced Watermark Consulting’s report on their analytics over the last 10 years of the S&P 500 overperformers and underperformers. The one central theme: Overperformers all leverage customer experience, whereas under-performers are laggards. They are not leveraging it. We are seeing mainstay companies, CBRE and others, who have historically not really had research as a primary function in the organization, but they’re all investing in our field. This is an exciting episode. I know you will find a lot of value in it, but first a word from our sponsor.

[00:54]

This episode is brought to you by HubUx.  HubUx is a productivity tool for qualitative research.  It creates a seamless workflow across your tools and team.  Originally, came up with the idea as I was listening to research professionals in both the quant and qual space complain about and articulate the pain, I guess more succinctly, around managing qualitative research.  The one big problem with qualitative is it’s synchronous in nature, and it requires 100% of the attention of the respondent. This creates a big barrier, and, I believe, a tremendous opportunity inside of the marketplace.  So what we do is we take the tools that you use; we integrate them into a work flow so that, ultimately, you enter in your project details, that is, who it is that you want to talk to, when you want to talk to them, whether it’s a focus group, in-person, or virtual or IDI’s or ethnos; and we connect you to those right people in the times that you want to have those conversations or connections – Push-Button Qualitative Insights, HubUx.  If you have any questions, reach out to me directly. I would appreciate it. Jamin@HubUx.com

[02:18]

Hi, I’m Jamin Brazil, and you’re listening to the Happy Market Research Podcast. My guest today is Jon Picoult, founder and principal of Watermark Consulting. Founded in 2008, Watermark Consulting offers consulting services to top brands around improving customer experience. Prior to founding Watermark Consulting, Jon has served in leadership roles at both Mass Mutual Financial Group and American International Group. He holds a degree in cognitive science from Princeton University and an MBA from Duke University. Jon, thanks for joining me today on the Happy Market Research Podcast. 

[02:52]

Hi, Jamin, glad to be here.

[02:54]

I have referenced your work on the show probably at least in five to ten episodes. I have also talked about your work at two talks I gave and then also in the industry and then also I teach an MBA course and I reference your work in that MBA course. I’m going to Michigan State; I’m on the board for their Masters in Market Research Program. I’ll be there next week. I’ll be talking about Watermark Consulting and specifically your report. I’m going to be diving in deep on this report on this particular podcast. That’s why pursued you so hard to be on it; so, thanks very much for joining me. But before I do, I’ve got to get to know you a little bit. Our audience likes to get to know you a little bit.  So we’re going to start with our patent question, if you will. Tell us a little bit about your parents, where you grew up, and how that’s informed your career. 

[03:41]

So, I grew up on Long Island in New York.   And my mom was a nursery school teacher; my dad was a Wall Street securities analyst covering stocks for insurance companies. And as far as how their upbringing informed my career, I guess I’d say that seeing my dad come home every night dressed up, suitcase in hand, kind of was my first exposure to the business world. I think that I sort of thought, “Well, Gee, that’s what I want to do.”  I even insisted to my parents back when I was in elementary school, I insisted on taking one of my dad’s old Samsonite briefcases and carrying my school supplies and my books and whatnot in a Samsonite briefcase. In hindsight, God knows what my teachers and my fellow students were thinking when they saw me…

[04:38]

Probably thought this guy just bought some stocks.

[04:39]

…tote that in elementary school. I mean really, but yeah, that was that was my upbringing. 

[04:45]

How old were you when, I assume you made some side money somehow working for your parents’ allowance, something along those lines? 

[04:53]

So actually, I did a lot of lifeguarding. That was my primary job in summers and whatnot and in winters too in indoor pools.  Did a little internship for my dad here and there. But where I really got the business bug, if you’re interested in knowing, was in college.  I wanted to DJ for the college radio station at Princeton where I went. The radio station was actually a commercial station, so a little bit different than other college stations in that it didn’t receive any money from the university. It was all self-supported through advertising sales. So, I’m the low person on the totem pole. And I said, “Hey, I want to get a show.” And there are tons of people vying for shows. They said, “Oh, yeah, you can have a show. You just need to bring in the money. If you bring in advertising sales, you’re going to be in a much better position to get a show.”  And so, actually, that was my first entree into business really was door-to-door radio advertising sales. And it’s actually where I first kind of got this taste of customer experience and understanding how the experience that you provide to people, even before they’re a customer, even during a sales interaction, how all of the elements of that experience can really do wonders in terms of helping to cultivate a relationship with people. And so, that was my first foray into true business. And I’m happy to tell you that I brought in a lot of ad sales and got a prime radio slot, a Sunday night oldies show is what it was called, 11:00 PM to 1:00 AM, prime spot on college radio.  And yeah, that was it. 

[06:22]

You know, if you decide you need another side hustle, we could use some help on advertising revenue on the show. I’m just kidding. 

[06:30]

That’ll be my fallback opportunity. 

[06:33]

So, did you buy any stocks growing up? 

[06:35]

I remember that my parents bought me some stock here and there.  When I first became of an age where I can invest myself, I was actually a mutual fund kind of guy. So, I shied away from buying individual stocks and was more schooled in sort of the idea of just diversification and so, yeah, I bought into mutual funds but started at a very early age and, yeah, so.. 

[07:03]

I’m fishing here, and what I’m really looking for is like you had some very good jobs. You’re in both places for quite awhile, right? Just under a decade. And yet you decided in 2008 to leave and start a consultancy, which is certainly in the early years, everybody knows that’s a saw blade of emotion, right? From the ups and downs, based on winning projects and delivering its projects. When did you decide that you were going to step out and start a consultancy?

[07:38]

So, I had always had an interest in putting out my own shingle. I think that that was just something that was inside of me all along even though I was spending my whole career in the corporate ranks, in large companies, no less. But I was always intrigued by the idea of putting out my own shingle in terms of having the ability to work on what really interested me the most and focus and build a business in a way that I thought it should be built and to have really complete control over that, which is not something, despite your best efforts, that you have when you’re working in a large organization. And so, in 2008, the opportunities sort of arose in that the company I was working at…  I had been hired by the CEO of the company. He left that company. A new CEO came in, wanted to choose their own team, which, of course, everybody has the right to do. And so, I saw the writing on the wall. And at that point, remember what was going on in the U.S. at that time: that was when the financial crisis was really bubbling up and at its height. And so, while I thought about looking for other executive opportunities at that time, I said to myself, “Well, Gee, you know, until I find the right opportunity, let me put that shingle out; let me get started. And it might just be a way to sort of bide my time until the next executive opportunity comes that appeals to me. Or maybe it’ll be actually a long-term endeavor.”  And it turned out to be the latter. And I’m very glad that that’s the way that it went. 

[09:16]

Who was your first customer? 

[09:18]

My first customer. The company, it was Marsh & McLennan. 

[09:24]

Not too bad. 

[09:25]

No, not too bad. And, actually, it was business that came through a connection that I had developed earlier in my career — the value of networking, of course. But yeah, that was my first customer, and it was a great customer to have, obviously, a name people would recognize.

[09:42]

Yeah, no kidding. And it’s nice being able to get to revenue is really important. But then I guess to the other point of it:  the validation that that creates or the social trust that that creates when you have that name behind you is a big lift to the business and you personally. 

[09:59]
Yeah. And actually, I tell this to people who I talked to who are interested in starting their own businesses and being an entrepreneur. And I tell them that when I first launched my company, what I realized was the number one priority had to be building credibility, particularly if you’re a boutique consultancy that’s trying to work in the same market as much bigger entities and, obviously, landing a marquee client helps in terms of building that credibility. But, quite honestly, for probably nine months when I first launched the company, my focus was purely on writing and speaking because I decided that was the best way to build credibility in terms of people — right or wrong, when people see you up on a podium, when they see your name in print and that you’re authoring articles and whatnot — right or wrong, it adds credibility. Hopefully, if you have something meaningful and valuable to say to them on that podium or in that article they’ll walk away feeling like, “Okay, this is a credible player.”  And that actually was my focus for nearly a year before even landing a single client was just building that brand, if you will, and that credibility so that people would take Watermark seriously. 

[11:14]

Yeah. I, obviously, completely subscribe to that point of view. It’s really a one-sided value exchange, right? So it’s you contributing to a market that, eventually, you are going to be able to have some level of harvest, but you just have to have faith as you’re going through that process that, at some point, it does turn up favorable to you. What kept you going? Cause that’s a long time to be contributing. It’s hard to do that discipline and not get the sort of instant gratification because social media at this point was still very early. So you didn’t have like all the thumbs up and likes, although I guess Tumbler and whatnot were trending at that point. So you, maybe you did get that sort of gratification on a short-term basis. But anyway, how did you keep the intestinal fortitude, as my grandfather used to say?

[12:07]

Yeah, this might be unique to me, but you talk about the delayed gratification. There was actually some instant gratification for me because I enjoyed writing and speaking very much. I continue to enjoy that to this day. And so, merely getting published. I remember the first time I had an article published in the New York Times. That was tremendous gratification. And the first time I landed a big speech in front of a large group…  So, even though there was an alternative objective, a longer-term objective in terms of credibility building there, personally for me, it was actually very gratifying to accomplish those things. And so, that definitely kept me engaged through the course of the journey. 

[12:51]

That’s awesome. So, tell me about a specifically difficult or a material challenge that you have overcome either personally or professionally. 

[13:05]

What we were just talking about, that would pretty much be it ‘cause starting a new company is a steep climb to begin with.  Starting a new company in the midst of the greatest economic downturn since the depression increases the difficulty of the dive. And so, I look back and say without question, that was the biggest challenge that I probably had professionally in terms of just overcoming that, given the headwinds, given the environment that I was operating in. 

[13:43]

So was the worst possible time to try to start a business. Anyway, I just finished talking with a few guests centric to user experience.  Our space is so interesting because nomenclature is really, really important: the words that we use to describe things. So we have these casts, right? We’ve got like market research that fits some place inside of the corporate kind of ecosystem. You’ve got user-experience research that fits there and, and you also have customer experience.  And, if you look at Google trends, you’ll see there’s an inverse relationship over the last ten years between market research and customer experience, which is very eyebrow-raising for me. We were talking about this a little bit at the beginning of the show. There’s this new group of researchers that are coming in and they might not… Market research feels a little bit, just being honest, it feels like maybe a little bit…  Not a lot of people know what it is, and it feels a little bit old school, whereas customer experiences is something that’s gotten a lot of attention in the media over the last couple of years. And you definitely see that from a Google analytics perspective. So, tell us from your perspective, what is customer experience? 

[15:06]

So, if I had to give you just sort of a phrase to define that, I’d say customer experience is really how customers FEEL about their interactions with your company or how they feel about their interactions with you. And it’s worth just unpacking that definition a bit because when we talk about the word “interactions,” how they feel about their interactions with your company, it’s very broad. Those interactions really encompass every live, digital and print encounter that they have with you through the entire customer life cycle, even before they’re a customer. The experience begins before somebody is even a customer. I’d argue the experience actually persists longer than many people would expect. You hope you never have a customer that defects from your company but, if they do, I would submit to you that that’s a touch point that deserves to be managed as carefully and intentionally as any other in your customer life cycles. So the “interactions” word is really very broad, and I think many people don’t understand that, particularly those, for example, who think customer service is synonymous with customer experience. Customer service is really just but one component, just the way user experience is but just one component of customer experience. So the word “interactions” is important to understand. And then, the second word really to unpack is this word “feel,” how they “feel” about their interaction. A lot of the behavior that you cultivate in people that is repurchase behavior or recommending behavior, referral behavior, it’s really driven largely by their emotional response to the experience as opposed to their rational response. As the behavioral psychologist Daniel Kahneman once said, it’s the emotional tail that wags the rational dog. That is true in customer experience.  And so, it’s not, for example, about how fast you answer the phone. It’s not about how quickly you turn around that quote. Those are all elements of it. But it’s that visceral reaction that people have, the emotional reaction that is, ultimately, what is going to drive their engagement with you. So that word “feel” is very important. And then the last word I’d highlight in the definition is the word “customer.” How customers feel about their interactions with your company. It’s important to understand that that word “customer” also needs to be defined very broadly. Sometimes, the customer might be an individual consumer; sometimes, it might be a business if you’re in a B to B business; sometimes, the customer might be a distributor where you’re trying to get shelf space or trying to somehow circulate your product; sometimes, the customer is a colleague that’s just down the hall from you or one of your employees. And I think that the techniques that companies use to engineer a great customer experience can actually be applied to all of these different constituencies not only in terms of engaging individual consumers, but even engaging employees at a company or job candidates ‘cause their customers in a sense. You’re serving them; they’re interested in applying for a job and… 

[18:12]

Glassdoor, Glassdoor, right.  Glassdoor is a…  

[18:15]

Right, right, yeah, sure. So that’s really how I would describe customer experience. The term “user experience” is, I think, that’s a very important part of the customer experience. But again, it is just one part.  And the market research piece, I think that is also part of the customer experience in the sense that, if you’re trying to deliver a great experience to your customers, what’s really important is to deliver a relevant experience. When I look at the companies that are legends in this regard, there are a number of key principles that I’ve identified that they do exceptionally well. And one is that they create a very relevant experience for people: something that’s pertinent, something that resonates with them both rationally and emotionally. If you want to understand what’s relevant to your customers, you need to cultivate insight, and market research and customer research is a key way of doing that. 

[19:06]

I need to rename the show.   

[19:11]

Do I get credit for that?

[19:12]

Yeah, you will definitely get credit for it. It’s something that I’ve really struggled with, to be honest, because I, growing up in the 90s inside of primary research, we really didn’t have a customer experience as a set-aside discipline that I was exposed to. I’m sure it existed. And now, in every way, it’s eclipsed market research from a visibility perspective. 

[19:37]

It has become sort of buzzwordy, which is a bad thing I’d argue. One thing that that troubles me is that the word, the term “customer experience” gets thrown around a lot in the workplace, but I don’t think everybody really knows what that means. And, as I said, the people that use that term interchangeably with customer service, I’d argue that there’s a big disconnect there in terms of their level of understanding. Also, if I just might, ‘cause you were mentioning about the market research and how it’s evolved today and whatnot and how it relates to customer experience, something that, I think, doesn’t get enough coverage and that people don’t talk enough about in the market research world is how market research is part of the customer experience. It’s actually part of the experience of the customers that you are reaching out to to conduct that market research. And the classic example I like to use to illustrate that are customer surveys that dissatisfy your customers.  We’ve all gotten those surveys that they could be like 20-pages long; they could ask you to remember things, an interaction two weeks ago that you have no clue about. And I think that — no offense to market researchers, to anybody in the research realm — but I think that’s something that people in that discipline would be wise to understand is that the work that they are doing is part of the experience itself, and so not only should it be used to cultivate insight, it should also be used to strengthen the impression that that customer has of the company that’s conducting that research. 

[21:19]

The point that you’re making right now is, in my opinion, should be one of the tenets (we should read a blog post on this) like tenets of research of what is the rubric-base understanding of “Should I do this project?” or I should at least check these boxes to ensure that…  Mobile compatibility is a great example. I launched a survey recently. It wasn’t my survey. I didn’t program it, but I was doing some work for it, and it was getting really bad completion rate and I’m like, “What in the world is going on? Incidents shouldn’t be this low.” It turns out it wasn’t mobile compatible, and in a world where you’ve got over 60% of respondents happening now on mobile devices… Anything I take is on a mobile device; I don’t sit in front of my desktop anymore and take a survey; I’m doing work at that point. We, as researchers, when we say that we’ve heard this said a lot:  “It used to be the case that brands were who said they were and now they are who their customer says they are…” This became very apparent to me at Decipher about 15, oh, gosh, less than that, like 10 years ago. We were doing this longitudinal study for eBay. We’d been doing it for a couple of years, and I looked at the email report, and we had just sent over a billion emails against this project over the period of time that we had had it. They were basically customer-satisfaction type NPS-ish thing, different than that but that was the gist of it. And I’m like, “Holy crap, that’s a lot of… That’s a lot of…”  You think like direct marketing, for example. You know what I mean? That’s like marketing department should have visibility on all those touches, and yet there’s zero visibility there. So yeah, research is an extension of brand. 

[22:59]

Yeah, absolutely. 

[23:01]

Your service is geared towards optimizing customer experience for your customers. Who are your customers? And I mean down to like who are you interacting with at the corporate level from a level perspective? 

[23:12]

Sure. So, the first thing I would say is — and this gets back to the definition of customer experience — the work that my firm does, I’d actually describe it as straddling two dimensions and that is the customer experience as well as the employee experience. Because the way I encourage people to think about it is a great customer experience is like a well choreographed performance. And there is an onstage component, which is all the live print and digital touch points that the customers see. But then there’s also the backstage component and that’s everything that’s going on behind the scenes, which, while invisible to the customer, nonetheless can exert a very meaningful influence on the quality of the experience that’s delivered. And backstage influences might be things like your hiring process, the types of people that you’re hiring, how you vet them, how you onboard them and train them, how you measure and reward them, the cultural norms in the organization, leadership behaviors. These are all things that create an environment that either can be conducive to creating a great experience or can undermine it. So, my firm, actually…  The work that we do with our clients often straddles those two areas, both the onstage and the backstage. And in terms of who we interact with at companies, it does vary quite a bit. There are companies that have at this point chosen to appoint like a chief customer officer. So it’s not uncommon for somebody like that to be our primary point of engagement. But there are also firms that we’ve worked with where it’s the CEO that just might be very passionate about this and is the one who’s driving the activity. We’ve also seen customer experience live in marketing; so, a CMO might be our primary point of contact. We’ve seen it live in operations where a COO might be the primary point of contact.

 And actually I think that that diversity of contacts and how this thing called customer experience resides in so many different places actually speaks to why it can be difficult to really nail this thing in an organization because there’s both an art and a science to customer experience. And if you think that it is just a marketing endeavor, you are doomed to fail. And if you think it is just an operational endeavor, you are doomed to fail. And I have found that the people we work with that are most successful are the ones who can actually dip their toes in both of those dimensions. People who might be a trained marketer, but they’ve got a good sense of the operational aspects of how to not just articulate a value proposition but to bring it to life operationally, to really weave that customer experience theme through every interaction that you have with a company. And then, conversely, we’ve worked with people in operations roles, who might not be classically trained marketers, but they understand that aligning the experience with the brand and how it is defined is critical. So I think it is kind of fascinating if you see just the variety of individuals that we work with and that are often reaching out to us for help. It really does reflect the criticality of having sort of a left-brain-and-right-brain approach to engineering customer experiences. 

[26:29]

What is the customer trigger for them to reach out? 

[26:33]

If we look at the most common reasons why people reach out to us, I’d say it probably falls into three or four categories. One is the company that says we’re just launching a customer experience initiative, and we need help understanding how to structure that.  Should we hire a chief customer officer? Should we create a centralized team? If we do, what should they be responsible for? What should their priorities be? And so, that’s one common type of engagement is helping them build almost that organizational scaffolding, if you will, on how to structure a customer experience improvement initiative. 

A second common type of engagement is when a company will come to us and say, “We know in our hearts that we can do better for our customers, but we’re just not quite sure where and how to start.” And so, we have a methodology that we use in that situation, which is essentially a very deep and comprehensive dive into the firm’s current customer experience, basically, answering the question: “What does it really feel like to be your customer?”  Because you might think you know what it feels like, but within the walls of the organization, often that view is very different than what it actually feels like to the customer. So helping them map that out for people, show them the highs and the lows in the experience, and to give them a very detailed road map for how to get from point A to point B, which, mind you, isn’t just about enhancing existing interaction points. It can also be about adding entirely new interaction points that don’t exist today but help to elevate the quality of the experience. So that’s a second common type of engagement. 

The third I’d say is when people are at an even earlier stage and they say, “Hey, you know, we’re hearing about this customer experience thing, but we need to sort of get our executive team on the same page with the what is it all about and how do great companies really manage it.” Or maybe they’re already there with their executive ranks, and they need help with the front line:  getting them to understand what is the customer experience and how can they personally on the front line each day…? What can you do in order to influence the quality of that experience in your role? And so, for that we’ve got a lot of educational programs that help spread the Gospel, if you will, around not just what customer experience is but the techniques great companies use to effectively manage it. 

[28:50]

So, let’s dive into the report. The findings, as I understand them, you’ve got the S&P 500, which has had year-over-year improvements for the last decade, material up and down, but total aggregate certainly up.  The analytics that you’ve done is to identify that CX leaders are about 45 points above the S&P and probably the eyebrow-raising part is the CX laggards are underperforming by 75 points, which I think is a really important.  That’s a material Delta between the two. So, talk to us a little bit about the methodology of the report and then maybe unpack for us this key finding. 

[29:36]

Sure. So, one thing that might be helpful is actually to talk just a little bit about the origin of the report and why we even chose to start doing it. And it goes back to when I first established Watermark a decade ago because something that I saw then as we were in that credibility-building stage, and this is something I even saw in the corporate world when I was in corporate roles.  But a lot of executives and companies pay good lip service to the idea of customer experience and good customer service. But the dirty little secret that everybody has that they don’t talk about in the town hall meetings with employees and whatnot, is that there is this inherent skepticism of “Does it really pay off?” And I think in part that skepticism is due to the fact that people see companies out there in the marketplace that seem to do a really bad job for their customers yet seem to be profitable at least for some period of time.

And so, when I launched Watermark, I was really thinking a lot about how do you open the dialogue with people to get them to entertain the idea that this might actually be something worth investing in. And I started to think, “Well, what is the language that every business executive understands?” And what it came down to was shareholder value. Whether you’re a public or private entity, that is a proxy for the value of my company. And so, I thought, “Okay, if shareholder value is the language everybody understands, can we demonstrate the value of a great customer experience in that universal vernacular?” And that really was the birth of the Watermark customer experience ROI Study. And so, what we did is we didn’t pick the customer experience leaders or laggards ourselves. We weren’t stacking the deck. We actually used research from other well-known firms that each year had established programs where they were interviewing over 10,000 consumers and ranking 200, 300 companies in quality of customer experience.  
We took publicly available information and, basically, created two portfolios, two model portfolios. The leader portfolio was made of the top 10 publicly traded companies in customer experience; the laggards were made up on the bottom 10. And then, what we did is each year when those rankings came out, we went back a year and calculated the stock market performance of those companies. Now, the reason we went back a year is because we wanted to insulate ourselves from the criticism that the mere publication of the report, the mere selection of those companies as the leaders or laggards, might actually drive their stock price. And we believed that whatever was happening in those companies was already baked into their performance the prior year before the research surveys identified them as leaders or laggards. So we did that, and, basically, year after year you assume that you create these model portfolios, you repopulate them each year, and you look at the aggregate performance.

And so what we found (we’re now up to 11 years of data that we have) over that 11-year period, as you noted, the customer experience leaders outperform the S&P by about 45 points; the S&P outperforms the laggards by about a 75. And if you look at the Delta in performance between the leaders and the laggards, it’s a three to one ratio. So quite significant. And something I would just say:  You noted that your attention was drawn to the, the difference between the S&P 500 and the laggards. And I think that’s actually a very important thing to highlight because many people, when they’re thinking about customer experience investment, they’re thinking, “Well, what’s the upside?” But nobody talks that much really about what’s the cost of not doing anything. And the cost of not doing anything is illustrated quite vividly and in great pain by those lagging companies that are underperforming the S&P and far underperforming the leading companies. The study, which has become, —  and I’m so happy to hear that you reference it frequently — and, as you probably know, it’s become one of the most widely cited studies in this area within customer experience. And I have found it is a great way to start a conversation with people who have an inherent skepticism about whether this stuff really pays off because it’s just hard to argue with 11 years now that this pecking order, this pattern of performance, has persisted. And I want to be very clear that it’s not a perfect correlation. We’re talking about portfolios of leaders and laggards that are outperforming, underperforming. The fact of the matter is there are a lot of ways you could screw up your business even if you have a great customer experience. And the example that I like to use for people is actually Borders Books.  Borders Books back in, I think it was, 2011 was actually the number-one rated company in customer experience. And within a year they were bankrupt. And the reason for that is because there were a whole host of things that they did in their business that just completely torpedoed their ability to perform. They locked in long-term leases so that when the real estate market collapsed, they couldn’t take advantage of lower real estate prices. They had four CEO’s in like five years. They had outsourced their e-commerce to Amazon, which is like putting the fox in charge of the hen house. I want to be clear that it’s not a perfect correlation, but what the study shows is that, on average, the companies that over the long-term are leading in customer experience are indeed outperforming the market and their peers. 

[35:18]

I’m really interested in this next part. How many companies are fitting into that underperforming? I know you said bottom 10% but, if you pull back a little bit, is it just a few companies? When I think about like the, the Delta – the 45 up, and the 75 down, which is a heavy weight, it feels like the majority of companies in the S&P are actually doing relatively well inside of this space, right? And then you’ve got this bottom 10% or really far away kind of a thing. And this is anecdotal; I haven’t actually crunched the numbers. I don’t know which companies are necessarily fitting in those categories. But really what I’m thinking about is the total addressable market for CX or consumer experience is, do you see that as a like is it going to grow a lot over the next few years? And I’m going to end on this last story. I was listening to a podcast, Donuts to Dollars [sic -Dollars to Donuts], which Steve Portigal’s the host of that, well-known user experience researcher. And he had the head of customer experience on his show. I forget the guest’s name, but the company was CBRE, and they didn’t actually have a centralized CX function or research function in the organization.  And over the whatever it’s been, (I think at that point it was less than a year when she did the interview) they had already had five staff there and were really moving aggressively from installation perspective. So my point is that you’ve got this really large organization that has not historically thought of CX as being playing a play, and, yet now they’re starting that investment piece. Conversely, you’ve got Facebook that, in and of themselves, has over 600 UX researchers, right. Forget about the other disciplines. Which is kind of like the other end of the spectrum. Do you think that the overall market is in CX is going to be growing or do you feel like it’s fairly stable? What’s your point of view over the next couple of years? 

[37:16]

Well, Gosh, I’m kind of biased probably to answer that question.

[37:19]

Both of us are and I feel like this is a little bit, and, to that point, I really try not to be a conversation with ourselves, which I liken to Fox News or something. But…

[37:29]

Let me answer your question this way. Here’s what I would say. I think that particularly today, (I think this has always been true but especially these days), I think that many forms of competitive differentiation are fleeting. New products and new technologies can pretty easily get from one company to another.  Cost leadership is difficult to achieve, let alone sustain, but a great customer experience and the internal ecosystem that supports it can actually be difficult to replicate and can accord tremendous strategic and economic advantage to a firm. And so for that reason, if I had to place my bets anywhere, it would be on focus in customer experience increasing over time and companies and industries that maybe didn’t think in those terms in the past, starting to think about it because I feel that in the inevitable march towards commoditization, it is the customer experience that will be your savior. I mean that is what is going to inoculate you from a lot of competitive forces that can turn your company into one of the many corporate carcasses that litter the road of those firms that thought that they were delivering something differentiated but, in truth, were not. 

[38:45]

Is it Clay Christiansen? That book that talks about the only real sustained point of differentiation is customer relationship. I think that’s right. Anyways, it’s either Crossing the Chasm [sic] or…  I mean there is no IP.  There’s nothing that you can protect.  Zoom is a great example of that in the market. We all saw their S-1 that was filed, and yet that company entered probably…  I mean so dominated with GoToMeeting and Oracle’s, the whole Citrix-type framework, and for another company to be able to come in and the offers basically the same exact thing, but in an optimized way — We’re using it now, as a case in point — it’s just remarkable. How if you pay attention to that, creates this whole land-grab opportunity even in completely entrenched and established markets. 

[39:37]

Yeah, I think that’s an excellent example. The example I also like to use for people is Blockbuster Video.  Blockbuster Video, they thought they were doing great. They could actually probably, and this is another common mistake that companies make, Blockbuster was probably looking at its customer retention statistics and was like, “Hey, we’re doing terrific.”  But what they didn’t realize, retention is not a proxy for loyalty. There are a whole host of reasons why your company might retain customers, but yet they’re not really loyal to you and, when something better comes along, they will quickly jump ship. Some people might call it sort of digital disruption and whatnot with some of the more recent examples of this with an Amazon and what it did to bookstores or what Zappos did to Payless ShoeSource.  I mean to me it’s not digital disruption. It’s about somebody coming along and figuring out a better way to skin the cat, a way to deliver a better customer experience. And if that happens to be enabled in part by digital technology, well, then great. But, if I go back to your original question about “Is the market going to expand?” I think if there’s any part of the business marketplace where people are thinking, “Hey, we don’t need to really focus on this,” it’s probably in those industries that are somewhat monopolistic where the thought is, “Hey, people don’t have a substitute.  So why should we be investing in creating a better experience from them?” But that’s when I point people to the examples of Borders or of a Blockbuster because somebody is always going to figure out a way to deliver that better customer experience to innovate. If you’re not doing it yourself, somebody else will do it for you, and that’ll be the end of your business. 

And a few years ago we started to do customer experience ROI studies for specific industries. And one of the industries that we selected was actually the airline industry. And we targeted it because many people say airline seats are a commodity. It’s like you’re going to fly with whoever gets you from point A to point B and you’re going to go for the lowest price. Well, we actually found that when you look at the customer experience leaders in the airline industry versus the laggards, it’s a very similar setup to what the study we’ve been talking about illustrates and that there actually is a performance premium for airlines that outperform in customer experience. That was something that surprised many people because they thought if there’s any industry where it’s highly competitive, highly commoditized, isn’t that it? But the fact is there are airlines like Alaska and JetBlue and Southwest that have figured out a way to break out of that mold. 

[42:08]

The Blockbuster example is really interesting cause it’s like the exact…  It’s the exact bulls-eye of a bad customer experience, right, because their business model was predicated on late fees. So it’s like when your business model is predicated on basically you screwing the customer, then you can pretty much guarantee you need to reach out to Watermark Consulting and sort that problem out. And, on the other side of it, I’ll talk a little bit about McDonald’s ‘cause I think McDonald’s has done a remarkable job of partnering with the buyers, the consumers, and identifying what the best value opportunity is in front of them. And I like the…  I think it’s four for two or something whatever the special is, but they run these various specials and they’ll actually tell people, “Hey, this is going to get you the most.” They don’t say it like this, but thank God I’m not in charge of the marketing department. But they don’t say it’s like, “Here’s the maximum calories for the least amount of dollar,” like that kind of thing. But they really have done an outstanding job of changing just the way that they interact with customers so that they are promoting to the customer, “This is how you can get the most out of your dollar right now.” 

[43:17]

Yeah. And also as long as you bring up McDonald’s, the other thing I think is worth noting about them is the consistency of the experience. I mean, you could argue whether you’re a McDonald’s fan or not, but the bottom line is you go into any McDonald’s, you can be pretty assured of what the experience is going to be like. And that is another component of a great customer experience. Creating any kind of experience sporadically is one thing, even if it’s a good one, but creating a really good customer experience consistently at every location, day in and day out, that’s an entirely different animal. And one thing you have to give credit to a company like McDonald’s for is, you know, whether you like it or not, the experience is certainly very consistent from outlet to outlet.

[43:59]

Yeah, it, you know, Gosh, okay, so this is funny and I’ll just personalize it a little bit. I actually go to McDonald’s about three times a week in the mornings. On my commute and they have good oatmeal. And I mean you can get oatmeal anywhere and it is, I think it’s probably equally healthy if I get it at Starbucks as well. So there, it’s a little bit cheaper. And so, I shifted because of the value thing to getting a different meal with some eggs. And I kind of got like once a week that was like my go-to breakfast. And it was always the same every single week for months. It was always the same until one time it wasn’t. And the eggs were runny, and I was like, “Never ordering that again.” And I, literally, won’t because of the fear of that, you know? So it’s, it’s interesting that you’re bringing that up because it really is such a hard freaking thing to do of delivering day in and day out that exact same customer experience. I remember at Decipher I had a customer and we would do great on like 15-20 projects and then one project wouldn’t go well. And I remember this client, he was at PayPal at the time, gave his feedback.  And he told me, “You know what, Jamin? I’d rather you just like decrease your overall quality just so I know what I’m going to get every single time.” 

[45:11]

Yeah, yeah. ‘Cause it could be jarring for a customer when you know, it’s like you’re spinning the roulette wheel, ”What am I going to get this time?” And that’s, that can be very jarring for people. 

[45:21]

Yeah, for sure. Anyway. Good. So, I want to end on this question. What is your personal motto? 

[45:26]

So, I’d have to say it is, “Seek to impress.”  Seek to impress all with whom you do business, whether it is individual consumers, business clients, whether they’re colleagues, coworkers.  I’ve always thought that if you’re aspiring to satisfy your customers, you’re aspiring to mediocrity and the key to delivering a great differentiated customer experience no matter what type of customer you’re talking about is to seek not just to satisfy them but to impress them, to leave that indelible impression that Watermark, if you will, that has them coming back for more and telling other people a about you. 

[46:04]

Perfect. My guest today has been Jon Picoult. Jon, thanks very much for joining me on the Happy Market Research Podcast.  He is founder and principal of Watermark Consulting. I’m sure that people can find you on your website. But maybe you could just give us a quick like how people could get in contact with you.

[46:22]

Sure. So, you can Google Watermark Consulting or you can go to a www.watermarkconsult.net.

[46:30]

Perfect. And, of course, that information along with his information on LinkedIn will be available on the show notes. Thank you so much for your time today. 

[46:39]

Thank you, I enjoyed it. 

[46:44]

This episode is brought to you by HubUx.  HubUx is a productivity tool for qualitative research.  It creates a seamless workflow across your tools and team.  Originally, came up with the idea as I was listening to research professionals in both the quant and qual space complain about and articulate the pain, I guess more succinctly, around managing qualitative research.  The one big problem with qualitative is it’s synchronous in nature, and it requires 100% of the attention of the respondent. This creates a big barrier, and, I believe, a tremendous opportunity inside of the marketplace.  So what we do is we take the tools that you use; we integrate them into a work flow so that, ultimately, you enter in your project details, that is, who it is that you want to talk to, when you want to talk to them, whether it’s a focus group, in-person, or virtual or IDI’s or ethnos; and we connect you to those right people in the times that you want to have those conversations or connections – Push-Button Qualitative Insights, HubUx.  If you have any questions, reach out to me directly. I would appreciate it. Jamin@HubUx.com   Have a great rest of your day.