January 2, 2025 • 27 mins
I'm excited to kick off season 3 with Rob Markey! It's his third time on the show, and I think you will see why I'm so excited about the insights he shares.
Rob is a Senior Lecturer at Harvard Business School and an Advisory Partner at Bain and Company. He’s widely known for his work on customer loyalty and the development of the Net Promoter Score and System. 🌟
In this episode, we explore Rob's journey and his current role at Harvard, including his innovative approach to teaching customer experience management.
Here are 3 key takeaways you won't want to miss:
🔍 Service Business Design: Learn how understanding customer needs and crafting a value proposition around those needs can drive business success. From extermination businesses to banking, effective service design is crucial.
📈 Customer and Employee Management Systems: Dive into the importance of customer management systems that help customers navigate the business model and employee management systems that elevate and empower employees to deliver exceptional service.
💡 Learning and Adapting: Discover the power of customer feedback and how companies can adapt, innovate, and grow even in the face of market changes and challenges. A great example discussed was the untapped potential in effectively responding to customer praise.
🌟 Special Highlight: Rob shares fascinating insights from his classroom experiences and practical exercises, like the customer compatibility exercise and letter-writing campaigns to service organizations. These exercises show the powerful impact of customer communication and feedback.
Don’t miss out on this episode packed with actionable insights and thought-provoking discussions on modern customer experience management! Tune in now and transform your CX strategy. 🎧🔥
#CustomerExperience #CX #BusinessStrategy #HarvardBusinessSchool #Leadership #CustomerLoyalty #Podcast #NetPromoterScore #MarkSlatin
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Today's episode is brought to you by Achieve Unite, a global
leader in leadership development, business acceleration and trusted
partnerships. Achieve Unite combines deep expertise, data
analytics and AI to help companies accelerate revenue, control
costs, elevate talent and build trust. They're more
than advisors. They deliver results with their proven three part approach,
(00:23):
talent development, ecosystem strategy and profitable growth
programs. Whether you're strengthening alliances, enhancing
internal systems or optimizing your partner ecosystem,
Achieve Unite is the partner you need for success.
Are you a CX leader who's ready to get executive buy in
(00:43):
and measurable results? The Trusted Guide Roadmap
Masterclass is back and registration is now
open. We share ROI models and walk you through proven
frameworks to to drive successful change. But what
distinguishes this course is the focus on leading change by
becoming a trusted Guide. Seats are limited
(01:05):
and the next session starts February 12th. Don't
wait. Visit empoweredcx.com to secure your
spot today.
Welcome to the Delighted Customers Podcast. I am so
glad you're here. We challenge conventional thinking about
(01:26):
customer experience because I believe that improving experiences isn't
just good for business, it's a powerful way to make a meaningful
difference in people's lives. Each week we feature thought
provoking conversations with industry thought leaders from
a variety of backgrounds offering unique perspectives and
actionable insights. Get ready to sharpen your
(01:48):
leadership and transform your approach to customer experience.
Let's dive in.
Well today you are all in for a treat. I am
so excited to have back on my show Rob
Markey. Rob is a advisory partner at
Bain and Company. He's a senior lecturer now at
(02:10):
Harvard Business School and we're going to dig into that a little bit while we
get into this conversation. He has been called the Vince Lombardi of
customer loyalty and and he founded Bain's customer strategy
and marketing practice. He's been published in many, many articles.
He wrote an awesome book called the ultimate question 2.0.
And I think what you'll you'll know about
(02:33):
Rob and to me he's on my Mount Rushmore because
he really changed the entire game when it comes to customer
experience. Customer experience Management working with Fred Reich held on
developing this thing called Net Promoter Score Net Promoter
System and it has really changed the game
across all industries and countries all over the
(02:55):
world. It really can't be overstated. Now people have done funny
things with it and not used it as it was intended but it is
still arguably the number one metric to measure
customer loyalty. So with that long intro. Rob, welcome to the
show. Mark, it is always such a pleasure to talk to You, I always
enjoy it. Same here. And
(03:16):
I'm excited. We've, we've had a couple of conversations on the
podcast. You were kind enough to record something for my students at
msu and today. And since then
you were brought in to go back to your alma mater and become a
senior lecturer at hbs. And so I had to
say, tell me about what you're doing. Let's update the audience on what's
(03:38):
going on at Harvard and to what extent the their
engaging customer experience management into their conversation as they bring up
tomorrow's leaders into the world. So maybe that's a good place to start,
is tell us about, you know, your role there and
what you're teaching and just give us some background on it.
Well, the funny thing is it's a little bit of a back to, you know,
(04:00):
full circle moment for me because it's a course that in its
prior life I took 35 years ago.
And, and it was part of what actually sent me down the
path to working with Fred Reichelt. Because in that course
we read Fred's first HBR article, which
was written with Earl Sasser, who was also a professor of mine
(04:23):
at hbs. And it was called Zero Defections Quality Comes to
Services. And it was about how this was
written at a time when total quality management was all the rage. Japan
was kicking the US's behind in manufacturing in
general. Total quality was part of what was behind that, the concept of
Kaizen. And so what Fred and Earl wrote about was
(04:45):
the idea that one of the best metrics of failure in
service businesses is the loss of a customer, the attrition
or churn of a customer. And that measuring that was a
very important way to keep track of the health of a
business. And then they further went and showed how
customer retention correlates with, or better, better said,
(05:07):
explains significant variations in profitability and
growth. And so they demonstrated that, for example,
5% difference in attrition rates can
account for a 25 to 100% change in
profitability. So I'm reading this as a
student in my what was then called service management course
(05:28):
and it resonated with my pre
business school experience and made me want
to go seek this guy out, this Fred Reichelt dude, and
see if I could figure out how to work with him. And so here I
am 35 years later and I feel like I'm to a certain extent paying it
forward. I'm teaching the next generation a new version of this course. And it's
(05:50):
a, it's a course that is located in
HBS's Technology and Operations management unit,
which is the group that's responsible for, as you can imagine, operations,
research, manufacturing process flows and all that stuff. And
so it's meant to be a reasonably analytic approach
to customer service driven businesses.
(06:13):
And we teach about everything from an
extermination business to banking to
facilities management, B2B and you know, kind of everything in
between. We help people who are future general managers develop
a framework and structure to approach to thinking about what
makes for a good service operation and
(06:35):
how you would organize a company around that.
Okay. And just to give, just to give the audience
listeners some context, there's the
classes meet. How often and how large
are they? Yeah, so it's part of the
MBA curriculum. It's taught in the second
(06:58):
year. The first year at Harvard is what's called the required curriculum.
Every student goes through exactly the same courses in exactly the same order
altogether 900 of them broken up into 10, I
think 10 or 11 sections of 90
ish each. In the second year they have the elective
curriculum. And so students can take, you know,
(07:20):
any group of courses they want to. This is one of the
popular ones. There are about 350 students out of 900 who
end up taking, making this each year. So there are,
and they're broken up into sections. The, the tenured
faculty member who has been teaching this for nine years or maybe
10 now, a guy named Ryan Buell, is a wildly successful and
(07:42):
wildly popular tenured professor. He is outstanding.
He's responsible for a lot of this curriculum and he has
186of those students in his sections. He
won the faculty teaching or the student teaching
award last year because he's so tremendous as a, as a,
as an Instructor. I had 75 in my section and they turned
(08:05):
out to be 75 energetic,
enthusiastic, very intelligent students
who pushed me and challenged me and
a little bit, you know, struggled alongside me as
I figured out how to teach in the Harvard Business School case
method. Well, and so I'm sure they feel fortunate
(08:27):
to have had you. Could you break down
like if I'm in your class, what are the major topics we're going to be
talking about? The course is broken up into four modules.
Okay. The first module is about overall service
business design. And so it really is the, it's the
introduction of almost all the concepts that will later be elaborated through
(08:49):
the rest of the course. And so we introduced the
idea that every business makes trade offs in the value
proposition that it offers and that those trade offs are generally
built around the needs, attitudes, Behaviors
of a group of target customers.
We introduce the idea of what we call in the course,
(09:12):
a funding mechanism for differentiated service, A way of
ensuring that you're generating enough, either cost savings or
excess revenue to fund differentially better service on some
dimensions than on others. We introduced the concept
of customer management systems. Once you get
customers in the door, helping them learn how to take advantage of the business
(09:34):
model and ensuring
that they're delivered a really great experience.
We teach about employee management systems, how
to elevate employees to the point where they can deliver great
service consistently and learn and grow. And then
the. So those are the second and third module, customer
(09:55):
management, employee management. The fourth module is really
about adapting, learning and growing. So customer
feedback as a source of growth, what to do when a market
changes, technology changes, in some cases when
regulations change, but how companies adapt
and change or grow in the face of
(10:17):
barriers, obstacles, challenges. So that is rich.
What do you hear from students in terms of what they
like the most about the class? So I think many, and
this is fresh on my mind because you can imagine me, I ask for feedback
from the students along the way. Yeah, far beyond what
(10:38):
most other professors at HBS or probably anywhere else do. But
I try to keep it simple and make it easy for them. What they consistently
talked about was the relevance of the
lessons not only to service and service management,
but also to other business
leadership situations. Because many of the things that we do
(11:00):
in managing service operations really pertain to,
you know, manufacturing companies or even commodity
industries just as much as they do to what we traditionally think about as service
businesses. They talk about the extent to which
the depth we go into elucidates the
practical considerations that they have to take into account.
(11:22):
And we go pretty far beyond the theory. We ground it in
theory. We clearly based on empirically derived
observations and a lot of research, but we introduce
a lot of practical considerations through the case method,
where we're illustrating real decision makers
making real choices in an uncertain.
(11:45):
And then I think they really enjoyed, in my case, you know, that
I do bring a certain amount of experience and
expertise to the table. And I think that having the option
of having a professor who developed the theoretical
foundation, my colleague Ryan, or having somebody
who has a lot more, you know, sort of practical experience
(12:06):
with large companies gave students the
opportunity to kind of select their own journey. Those who
joined my section tended to value that. And I'm sure that.
Well, I, having talked to some of the other students, the
ones who joined my colleague section, also loved what he brought to the table.
Yeah. So that's, that's so interesting. I wish it
(12:28):
were something like, I don't know, going to see a ball game or a theater
event or something where people could just buy tickets and come.
But you got to get in. You gotta get in
to go. So. But if you're not one of those people who
will probably, like me, ever go to Harvard Business School, but you're
interested in knowing what happens there. So we're shining a light on that a little
(12:50):
bit through one of the professors there. I mean, I think one of the things
at Michigan State that people who come through our program really love about
it is kind of what you alluded to and it's your, what you
bring to the table at Harvard is that most of us are
practitioners or were practitioners and didn't come from
academia. Nothing that there's anything wrong with that. So we have
(13:12):
both a little bit of the theory as, not that we created it, but we
have it as our background and grounding. But then we also have real
life stories that we can share from real
customers and real organizations. Well, I think the
benefit of that combination of the academic with the
practitioner and it's very clear front and center at
(13:32):
msu, it's front and center in
hbs, that combination does
two things. One, it brings that practical reality of
experience into the classroom, but the other thing it does is it makes sure that
you aren't overly relying on the
anecdotal I did this thing once and
(13:54):
here's how it worked. Therefore this is the right way to do it. My
experience, some earned the hard
way, is that oftentimes we do things that are successful and we
don't really understand what made them successful
until we do them enough times that we fail and what
we thought accounted for their success in the beginning sometimes turns
(14:16):
out not to be the case. And you know, that was one of the big
lessons that led us to the development of what we now call the. NET promoter
system is a misunderstanding of why
NPS the score had been effective in many of the
cases it had been in our early experience. Not until we had
failures did we know. And so what academics bring is that
(14:37):
rigor of pulling back the lens and looking at patterns across
lots and lots and lots of organizations and frankly a need
to kind of prove it on the causality
through peer reviewed research and lots and
lots and lots of reps and in my case
teaching, I'm sure you found this too, you know, that had a lot of value
(14:59):
to a lot of the dimensions of the course that I was
teaching. Yeah, did you. When you get into
the. The second segment of your course where you were talking
about really the customer experience piece of it, do you get into
Net Promoter at all? We do. We actually.
We have a couple of exercises that we have students
(15:21):
do that are a part of this. So one is what we call the
customer compatibility exercise. And there's. We
ask students to think about the ways in which
they impose variability on the companies with which they do
business. Think about different forms of variability you impose on
a service organization. There's arrival variability.
(15:43):
You may have people arrive. An extreme example of, or somewhat
extreme example of it is arriving really late for a reservation at
a restaurant or arriving at closing or just
after closing time. Now the restaurant has a choice to make whether they accommodate you
or not, right? Yeah, Right. There is. There is
preference variability. It's asking for things to be prepared differently
(16:06):
than are the way they're presented to you on the menu or reacting differently
to a dish you know, that everybody loves. But I hate
is a form of preference variability.
And so what is. What is. What is a. I'm using the restaurant example because
we can all relate to it. But. But we ask the students to really
observe how restaurants, and I say
(16:28):
restaurants, how any service organizations deal with this sort of
variability that they impose on them. And then we explore the determinants
of satisfaction with an experience based on
some combination of how the company
decides to handle the variability in
requests and how the customer
(16:49):
evaluates those. With one of the big lessons being an important lesson,
being something I've always said for, like, my whole career. The. The most
important decision you make or decisions you make are around who
you invite into your business system. Because
your business is set up. Your. Your. Your operation is set up to
serve the needs of a certain core set of
(17:11):
customers. Whether you know it or not, whether it was explicit or intentional
or not, you're better at serving some needs than others. You just are.
That's the way it works. Yeah. And if you
consistently bring customers in who
don't have those needs that you're best at
serving, you're gonna have a really dissatisfied customer base. And just
(17:32):
to give you an example, Ryanair actually has reasonably
high nps, not because they're a great airline, objectively,
but because they're really good at being clear about who they
are, who they're for, and. And attracting customers who value that.
And they even go so far as to make fun of, you know,
how bad they are at certain things in their. Like
(17:55):
Twitter or I guess it's now called x Feed, you know, where they'll, they'll,
they'll goof on the very fact that they are so horrible at certain
things because they're intentionally appealing to a
group of customers for whom that stuff isn't
what makes them happy. What makes them happy is a low price
reliably getting them from point A to point B. That's it.
(18:19):
This customer compatibility exercise, an example of helping
students get their heads around that. There's also a
letter writing exercise. We have them do something I did again back
in the late 80s where
we asked them to write a letter to a service organization
either praising or complaining or suggesting something,
(18:42):
and then see what the organization brings back as a way of
understanding how companies are set up to
listen and learn from customer input. And then
we use that as a way of talking about, for example, Net promoter feedback and
other forms of customer feedback and how to
scale a listening system that has impact
(19:03):
on how you deliver for your customers. I'm curious now, what
responses, if any, are they getting back from
these companies? And by the way, are they, are they letting them know this is
part of a business school project, or are they just acting as consumers?
We leave it to them to decide whether to disclose it and how
much. But we ask them in a, in a poll we do
(19:25):
to describe what they, what they disclosed. We also get
the, we see the letters, but we're able to see that, for example, we
jokingly call it dropping the H bombs, you know, saying, I'm a Harvard Business school
student. It doesn't materially change the
rate at which companies respond. Interestingly, yeah,
there are some, there are some differences, and sometimes people will do a much more
(19:48):
thorough and thoughtful response when students do that, but sometimes they don't, or
sometimes it has the opposite effect. We also encourage them to experiment
with modes of communication. So you
submit, do you write an email?
Do you respond in detail to
a customer survey? Do you send
(20:10):
a, you know, paper letter in an
envelope? You know, how do you, how do you do it? And what kind of
response we. The one thing we ask they not do is use social
media as their primary mode of communication because of the limitations of that
for observing the actual
response and frankly, for providing a richness
(20:31):
of communication to the company that
reflects a student's real understanding of their business, which is part of what we're looking
for, and also elicits a thoughtful response. But it is,
it is interesting. It is interesting and fascinating to see. And it's, it's very different
now than it was 35 years ago when I Did it. Much lower response
rates, a lot more automated
(20:52):
stuff. A lot of frustratingly defensive
stuff, which actually hasn't changed, I guess there was an auto rental company
that basically blamed the student for a
problem that they had imposed on the student. You didn't do this,
you didn't do that, you didn't do the other. It's like, wow, this is how
you want, this is how you want to communicate with your customer.
(21:13):
Yeah, I love those exercises. Like, I really want to take
your class, but they won't let me in. I'll do a special. Mark Slayton
class. Thank you, thank you for that. Thank you that
I'm in the special. I've always been in the special class.
There you go. So I
wanted to ask you, based on what you just shared about these
(21:36):
responses, it seems to me, and it
seems like the trend is in this place where the
responses aren't, broadly speaking, now, aren't terrific.
And it seems like if I'm going to be a little bit of an optimist
for a moment, I might say seems like there's
an opportunity amongst my peers if I'm a company who is
(21:57):
willing to take a somewhat proactive approach
to responding to customer feedback. I don't know what is
it? Is it. Maybe I'm thinking about it too hard, but maybe, is it low
hanging fruit? Mark, I am always surprised at
how companies fail to take advantage
of gaps in their standard practice or
(22:19):
competitive practice. Right. It is so much easier
today to respond to customers at scale
using gen AI capabilities to get you
started. You don't have to rely on it entirely. Right. Like, I get that there
are limitations and challenges, but man,
you could cut in to, you know, like a quarter or
(22:41):
maybe 10% the amount of time it takes to respond to
customer inbound communications
at scale in not only the amount of time, but obviously as a result,
the cost. One of the things that's fascinating
about this exercise is we ask the students to tell us
how satisfied they are with the organization when they first send their
(23:03):
letter and then we ask them again afterwards when they either have
or have not received a letter. Here's a shocker. It shouldn't
be a shocker, but it's a shocker. The people who are the most dissatisfied are
the ones who wrote letters of praise and received no
response. Hmm. What a miss, right? They went out of their way to
say I love you. Because here's something that I think that
(23:25):
you, you do really well and I wish you would do more of. And oh,
by the way, maybe in some Cases, they say, and here's some things that I
would love to see you do in addition. Right. These people put
real energy into this. And even though they knew it was an exercise,
the students. Right. Just the act of doing it for a company
they loved, it's almost like, it's like saying to your loved
(23:47):
one, I love you and getting back,
dead silence ghost. It's
horrible. Yeah. And it's funny. But it had a huge impact
on their, their perception of the company that they were doing business with. It
was only downside. Yeah. Companies
are measuring that. I think they're thinking about gems on the show and
(24:08):
there's, there's a gem. I think it's, there's two sides of that coin. One is
if you are a consumer of anything and you're either
happy or upset, it'd be interesting if you actually didn't just,
you know, say something to your dog or your cat about it, but
you actually wrote or communicate, call them communicated,
either positive or negative and just see what their reaction is. And then on the
(24:30):
other side of that, if you're the company, whether you are a
solopreneur or your IBM, you know, wow, what
an opportunity to. I mean we're talking about customer
loyalty. Someone, someone's saying they in one
way showing their affection for your product or service and
you're ghosting them. And
(24:52):
there's a huge opportunity to customer lifetime
values. The length of the relationship can be extended with
praise. Right. I don't know what you think, but to me that seems like
easy hit. It's. It's low hanging fruit.
Yeah. That seems like a pain in the behind. And
people, people are so tempted to focus on the negative. Like we have to respond
(25:14):
to every, every complaint. Yeah. Okay. But guess
what? Half the people who are complaining, they're not recoverable.
I hate to say that, but the ones who love you,
unrequited love is horrible. It's horrible. Well,
Rob, we have to continue again this conversation
because I could talk to you all day and we run out of time.
(25:37):
So it's been fascinating. I love to love hearing about,
you know, your, your great work at Harvard and whatever's
coming next. And thank you so much for being on the show today.
Really my pleasure, Mark. And you know, it goes both
ways. I. The reason I'm so long winded with you is because I enjoy talking
to you and you ask great questions. Well, same here.
(26:01):
Rob Markey, thank you so much for being on the show.
Awesome. I hope you enjoyed this episode of the
Delighted Customers podcast. It would mean so much. If you would take a
moment to subscribe, you can go to Apple, Spotify,
Amazon Music, or wherever you listen to podcasts. Click on the plus
(26:22):
sign or follow button and that will ensure that you don't miss an episode and
it helps get the word out to others. While you're there. I'd love it
if you'd leave a five star review. I look forward to seeing you back
here next Thursday.
Today's episode is brought to you by Achieve Unite, a global
leader in leadership development, business acceleration and trusted
partnerships. Achieve Unite combines deep expertise, data
analytics and AI to help companies accelerate revenue, control
costs, elevate talent and build trust. They're more
than advisors. They deliver results with their proven three part approach,
(00:23):
talent development, ecosystem strategy and profitable growth
programs. Whether you're strengthening alliances, enhancing
internal systems or optimizing your partner ecosystem,
Achieve Unite is the partner you need for success.
Are you a CX leader who's ready to get executive buy in
(00:43):
and measurable results? The Trusted Guide Roadmap
Masterclass is back and registration is now
open. We share ROI models and walk you through proven
frameworks to to drive successful change. But what
distinguishes this course is the focus on leading change by
becoming a trusted Guide. Seats are limited
(01:05):
and the next session starts February 12th. Don't
wait. Visit empoweredcx.com to secure your
spot today.
Welcome to the Delighted Customers Podcast. I am so
glad you're here. We challenge conventional thinking about
(01:26):
customer experience because I believe that improving experiences isn't
just good for business, it's a powerful way to make a meaningful
difference in people's lives. Each week we feature thought
provoking conversations with industry thought leaders from
a variety of backgrounds offering unique perspectives and
actionable insights. Get ready to sharpen your
(01:48):
leadership and transform your approach to customer experience.
Let's dive in.
Well today you are all in for a treat. I am
so excited to have back on my show Rob
Markey. Rob is a advisory partner at
Bain and Company. He's a senior lecturer now at
(02:10):
Harvard Business School and we're going to dig into that a little bit while we
get into this conversation. He has been called the Vince Lombardi of
customer loyalty and and he founded Bain's customer strategy
and marketing practice. He's been published in many, many articles.
He wrote an awesome book called the ultimate question 2.0.
And I think what you'll you'll know about
(02:33):
Rob and to me he's on my Mount Rushmore because
he really changed the entire game when it comes to customer
experience. Customer experience Management working with Fred Reich held on
developing this thing called Net Promoter Score Net Promoter
System and it has really changed the game
across all industries and countries all over the
(02:55):
world. It really can't be overstated. Now people have done funny
things with it and not used it as it was intended but it is
still arguably the number one metric to measure
customer loyalty. So with that long intro. Rob, welcome to the
show. Mark, it is always such a pleasure to talk to You, I always
enjoy it. Same here. And
(03:16):
I'm excited. We've, we've had a couple of conversations on the
podcast. You were kind enough to record something for my students at
msu and today. And since then
you were brought in to go back to your alma mater and become a
senior lecturer at hbs. And so I had to
say, tell me about what you're doing. Let's update the audience on what's
(03:38):
going on at Harvard and to what extent the their
engaging customer experience management into their conversation as they bring up
tomorrow's leaders into the world. So maybe that's a good place to start,
is tell us about, you know, your role there and
what you're teaching and just give us some background on it.
Well, the funny thing is it's a little bit of a back to, you know,
(04:00):
full circle moment for me because it's a course that in its
prior life I took 35 years ago.
And, and it was part of what actually sent me down the
path to working with Fred Reichelt. Because in that course
we read Fred's first HBR article, which
was written with Earl Sasser, who was also a professor of mine
(04:23):
at hbs. And it was called Zero Defections Quality Comes to
Services. And it was about how this was
written at a time when total quality management was all the rage. Japan
was kicking the US's behind in manufacturing in
general. Total quality was part of what was behind that, the concept of
Kaizen. And so what Fred and Earl wrote about was
(04:45):
the idea that one of the best metrics of failure in
service businesses is the loss of a customer, the attrition
or churn of a customer. And that measuring that was a
very important way to keep track of the health of a
business. And then they further went and showed how
customer retention correlates with, or better, better said,
(05:07):
explains significant variations in profitability and
growth. And so they demonstrated that, for example,
5% difference in attrition rates can
account for a 25 to 100% change in
profitability. So I'm reading this as a
student in my what was then called service management course
(05:28):
and it resonated with my pre
business school experience and made me want
to go seek this guy out, this Fred Reichelt dude, and
see if I could figure out how to work with him. And so here I
am 35 years later and I feel like I'm to a certain extent paying it
forward. I'm teaching the next generation a new version of this course. And it's
(05:50):
a, it's a course that is located in
HBS's Technology and Operations management unit,
which is the group that's responsible for, as you can imagine, operations,
research, manufacturing process flows and all that stuff. And
so it's meant to be a reasonably analytic approach
to customer service driven businesses.
(06:13):
And we teach about everything from an
extermination business to banking to
facilities management, B2B and you know, kind of everything in
between. We help people who are future general managers develop
a framework and structure to approach to thinking about what
makes for a good service operation and
(06:35):
how you would organize a company around that.
Okay. And just to give, just to give the audience
listeners some context, there's the
classes meet. How often and how large
are they? Yeah, so it's part of the
MBA curriculum. It's taught in the second
(06:58):
year. The first year at Harvard is what's called the required curriculum.
Every student goes through exactly the same courses in exactly the same order
altogether 900 of them broken up into 10, I
think 10 or 11 sections of 90
ish each. In the second year they have the elective
curriculum. And so students can take, you know,
(07:20):
any group of courses they want to. This is one of the
popular ones. There are about 350 students out of 900 who
end up taking, making this each year. So there are,
and they're broken up into sections. The, the tenured
faculty member who has been teaching this for nine years or maybe
10 now, a guy named Ryan Buell, is a wildly successful and
(07:42):
wildly popular tenured professor. He is outstanding.
He's responsible for a lot of this curriculum and he has
186of those students in his sections. He
won the faculty teaching or the student teaching
award last year because he's so tremendous as a, as a,
as an Instructor. I had 75 in my section and they turned
(08:05):
out to be 75 energetic,
enthusiastic, very intelligent students
who pushed me and challenged me and
a little bit, you know, struggled alongside me as
I figured out how to teach in the Harvard Business School case
method. Well, and so I'm sure they feel fortunate
(08:27):
to have had you. Could you break down
like if I'm in your class, what are the major topics we're going to be
talking about? The course is broken up into four modules.
Okay. The first module is about overall service
business design. And so it really is the, it's the
introduction of almost all the concepts that will later be elaborated through
(08:49):
the rest of the course. And so we introduced the
idea that every business makes trade offs in the value
proposition that it offers and that those trade offs are generally
built around the needs, attitudes, Behaviors
of a group of target customers.
We introduce the idea of what we call in the course,
(09:12):
a funding mechanism for differentiated service, A way of
ensuring that you're generating enough, either cost savings or
excess revenue to fund differentially better service on some
dimensions than on others. We introduced the concept
of customer management systems. Once you get
customers in the door, helping them learn how to take advantage of the business
(09:34):
model and ensuring
that they're delivered a really great experience.
We teach about employee management systems, how
to elevate employees to the point where they can deliver great
service consistently and learn and grow. And then
the. So those are the second and third module, customer
(09:55):
management, employee management. The fourth module is really
about adapting, learning and growing. So customer
feedback as a source of growth, what to do when a market
changes, technology changes, in some cases when
regulations change, but how companies adapt
and change or grow in the face of
(10:17):
barriers, obstacles, challenges. So that is rich.
What do you hear from students in terms of what they
like the most about the class? So I think many, and
this is fresh on my mind because you can imagine me, I ask for feedback
from the students along the way. Yeah, far beyond what
(10:38):
most other professors at HBS or probably anywhere else do. But
I try to keep it simple and make it easy for them. What they consistently
talked about was the relevance of the
lessons not only to service and service management,
but also to other business
leadership situations. Because many of the things that we do
(11:00):
in managing service operations really pertain to,
you know, manufacturing companies or even commodity
industries just as much as they do to what we traditionally think about as service
businesses. They talk about the extent to which
the depth we go into elucidates the
practical considerations that they have to take into account.
(11:22):
And we go pretty far beyond the theory. We ground it in
theory. We clearly based on empirically derived
observations and a lot of research, but we introduce
a lot of practical considerations through the case method,
where we're illustrating real decision makers
making real choices in an uncertain.
(11:45):
And then I think they really enjoyed, in my case, you know, that
I do bring a certain amount of experience and
expertise to the table. And I think that having the option
of having a professor who developed the theoretical
foundation, my colleague Ryan, or having somebody
who has a lot more, you know, sort of practical experience
(12:06):
with large companies gave students the
opportunity to kind of select their own journey. Those who
joined my section tended to value that. And I'm sure that.
Well, I, having talked to some of the other students, the
ones who joined my colleague section, also loved what he brought to the table.
Yeah. So that's, that's so interesting. I wish it
(12:28):
were something like, I don't know, going to see a ball game or a theater
event or something where people could just buy tickets and come.
But you got to get in. You gotta get in
to go. So. But if you're not one of those people who
will probably, like me, ever go to Harvard Business School, but you're
interested in knowing what happens there. So we're shining a light on that a little
(12:50):
bit through one of the professors there. I mean, I think one of the things
at Michigan State that people who come through our program really love about
it is kind of what you alluded to and it's your, what you
bring to the table at Harvard is that most of us are
practitioners or were practitioners and didn't come from
academia. Nothing that there's anything wrong with that. So we have
(13:12):
both a little bit of the theory as, not that we created it, but we
have it as our background and grounding. But then we also have real
life stories that we can share from real
customers and real organizations. Well, I think the
benefit of that combination of the academic with the
practitioner and it's very clear front and center at
(13:32):
msu, it's front and center in
hbs, that combination does
two things. One, it brings that practical reality of
experience into the classroom, but the other thing it does is it makes sure that
you aren't overly relying on the
anecdotal I did this thing once and
(13:54):
here's how it worked. Therefore this is the right way to do it. My
experience, some earned the hard
way, is that oftentimes we do things that are successful and we
don't really understand what made them successful
until we do them enough times that we fail and what
we thought accounted for their success in the beginning sometimes turns
(14:16):
out not to be the case. And you know, that was one of the big
lessons that led us to the development of what we now call the. NET promoter
system is a misunderstanding of why
NPS the score had been effective in many of the
cases it had been in our early experience. Not until we had
failures did we know. And so what academics bring is that
(14:37):
rigor of pulling back the lens and looking at patterns across
lots and lots and lots of organizations and frankly a need
to kind of prove it on the causality
through peer reviewed research and lots and
lots and lots of reps and in my case
teaching, I'm sure you found this too, you know, that had a lot of value
(14:59):
to a lot of the dimensions of the course that I was
teaching. Yeah, did you. When you get into
the. The second segment of your course where you were talking
about really the customer experience piece of it, do you get into
Net Promoter at all? We do. We actually.
We have a couple of exercises that we have students
(15:21):
do that are a part of this. So one is what we call the
customer compatibility exercise. And there's. We
ask students to think about the ways in which
they impose variability on the companies with which they do
business. Think about different forms of variability you impose on
a service organization. There's arrival variability.
(15:43):
You may have people arrive. An extreme example of, or somewhat
extreme example of it is arriving really late for a reservation at
a restaurant or arriving at closing or just
after closing time. Now the restaurant has a choice to make whether they accommodate you
or not, right? Yeah, Right. There is. There is
preference variability. It's asking for things to be prepared differently
(16:06):
than are the way they're presented to you on the menu or reacting differently
to a dish you know, that everybody loves. But I hate
is a form of preference variability.
And so what is. What is. What is a. I'm using the restaurant example because
we can all relate to it. But. But we ask the students to really
observe how restaurants, and I say
(16:28):
restaurants, how any service organizations deal with this sort of
variability that they impose on them. And then we explore the determinants
of satisfaction with an experience based on
some combination of how the company
decides to handle the variability in
requests and how the customer
(16:49):
evaluates those. With one of the big lessons being an important lesson,
being something I've always said for, like, my whole career. The. The most
important decision you make or decisions you make are around who
you invite into your business system. Because
your business is set up. Your. Your. Your operation is set up to
serve the needs of a certain core set of
(17:11):
customers. Whether you know it or not, whether it was explicit or intentional
or not, you're better at serving some needs than others. You just are.
That's the way it works. Yeah. And if you
consistently bring customers in who
don't have those needs that you're best at
serving, you're gonna have a really dissatisfied customer base. And just
(17:32):
to give you an example, Ryanair actually has reasonably
high nps, not because they're a great airline, objectively,
but because they're really good at being clear about who they
are, who they're for, and. And attracting customers who value that.
And they even go so far as to make fun of, you know,
how bad they are at certain things in their. Like
(17:55):
Twitter or I guess it's now called x Feed, you know, where they'll, they'll,
they'll goof on the very fact that they are so horrible at certain
things because they're intentionally appealing to a
group of customers for whom that stuff isn't
what makes them happy. What makes them happy is a low price
reliably getting them from point A to point B. That's it.
(18:19):
This customer compatibility exercise, an example of helping
students get their heads around that. There's also a
letter writing exercise. We have them do something I did again back
in the late 80s where
we asked them to write a letter to a service organization
either praising or complaining or suggesting something,
(18:42):
and then see what the organization brings back as a way of
understanding how companies are set up to
listen and learn from customer input. And then
we use that as a way of talking about, for example, Net promoter feedback and
other forms of customer feedback and how to
scale a listening system that has impact
(19:03):
on how you deliver for your customers. I'm curious now, what
responses, if any, are they getting back from
these companies? And by the way, are they, are they letting them know this is
part of a business school project, or are they just acting as consumers?
We leave it to them to decide whether to disclose it and how
much. But we ask them in a, in a poll we do
(19:25):
to describe what they, what they disclosed. We also get
the, we see the letters, but we're able to see that, for example, we
jokingly call it dropping the H bombs, you know, saying, I'm a Harvard Business school
student. It doesn't materially change the
rate at which companies respond. Interestingly, yeah,
there are some, there are some differences, and sometimes people will do a much more
(19:48):
thorough and thoughtful response when students do that, but sometimes they don't, or
sometimes it has the opposite effect. We also encourage them to experiment
with modes of communication. So you
submit, do you write an email?
Do you respond in detail to
a customer survey? Do you send
(20:10):
a, you know, paper letter in an
envelope? You know, how do you, how do you do it? And what kind of
response we. The one thing we ask they not do is use social
media as their primary mode of communication because of the limitations of that
for observing the actual
response and frankly, for providing a richness
(20:31):
of communication to the company that
reflects a student's real understanding of their business, which is part of what we're looking
for, and also elicits a thoughtful response. But it is,
it is interesting. It is interesting and fascinating to see. And it's, it's very different
now than it was 35 years ago when I Did it. Much lower response
rates, a lot more automated
(20:52):
stuff. A lot of frustratingly defensive
stuff, which actually hasn't changed, I guess there was an auto rental company
that basically blamed the student for a
problem that they had imposed on the student. You didn't do this,
you didn't do that, you didn't do the other. It's like, wow, this is how
you want, this is how you want to communicate with your customer.
(21:13):
Yeah, I love those exercises. Like, I really want to take
your class, but they won't let me in. I'll do a special. Mark Slayton
class. Thank you, thank you for that. Thank you that
I'm in the special. I've always been in the special class.
There you go. So I
wanted to ask you, based on what you just shared about these
(21:36):
responses, it seems to me, and it
seems like the trend is in this place where the
responses aren't, broadly speaking, now, aren't terrific.
And it seems like if I'm going to be a little bit of an optimist
for a moment, I might say seems like there's
an opportunity amongst my peers if I'm a company who is
(21:57):
willing to take a somewhat proactive approach
to responding to customer feedback. I don't know what is
it? Is it. Maybe I'm thinking about it too hard, but maybe, is it low
hanging fruit? Mark, I am always surprised at
how companies fail to take advantage
of gaps in their standard practice or
(22:19):
competitive practice. Right. It is so much easier
today to respond to customers at scale
using gen AI capabilities to get you
started. You don't have to rely on it entirely. Right. Like, I get that there
are limitations and challenges, but man,
you could cut in to, you know, like a quarter or
(22:41):
maybe 10% the amount of time it takes to respond to
customer inbound communications
at scale in not only the amount of time, but obviously as a result,
the cost. One of the things that's fascinating
about this exercise is we ask the students to tell us
how satisfied they are with the organization when they first send their
(23:03):
letter and then we ask them again afterwards when they either have
or have not received a letter. Here's a shocker. It shouldn't
be a shocker, but it's a shocker. The people who are the most dissatisfied are
the ones who wrote letters of praise and received no
response. Hmm. What a miss, right? They went out of their way to
say I love you. Because here's something that I think that
(23:25):
you, you do really well and I wish you would do more of. And oh,
by the way, maybe in some Cases, they say, and here's some things that I
would love to see you do in addition. Right. These people put
real energy into this. And even though they knew it was an exercise,
the students. Right. Just the act of doing it for a company
they loved, it's almost like, it's like saying to your loved
(23:47):
one, I love you and getting back,
dead silence ghost. It's
horrible. Yeah. And it's funny. But it had a huge impact
on their, their perception of the company that they were doing business with. It
was only downside. Yeah. Companies
are measuring that. I think they're thinking about gems on the show and
(24:08):
there's, there's a gem. I think it's, there's two sides of that coin. One is
if you are a consumer of anything and you're either
happy or upset, it'd be interesting if you actually didn't just,
you know, say something to your dog or your cat about it, but
you actually wrote or communicate, call them communicated,
either positive or negative and just see what their reaction is. And then on the
(24:30):
other side of that, if you're the company, whether you are a
solopreneur or your IBM, you know, wow, what
an opportunity to. I mean we're talking about customer
loyalty. Someone, someone's saying they in one
way showing their affection for your product or service and
you're ghosting them. And
(24:52):
there's a huge opportunity to customer lifetime
values. The length of the relationship can be extended with
praise. Right. I don't know what you think, but to me that seems like
easy hit. It's. It's low hanging fruit.
Yeah. That seems like a pain in the behind. And
people, people are so tempted to focus on the negative. Like we have to respond
(25:14):
to every, every complaint. Yeah. Okay. But guess
what? Half the people who are complaining, they're not recoverable.
I hate to say that, but the ones who love you,
unrequited love is horrible. It's horrible. Well,
Rob, we have to continue again this conversation
because I could talk to you all day and we run out of time.
(25:37):
So it's been fascinating. I love to love hearing about,
you know, your, your great work at Harvard and whatever's
coming next. And thank you so much for being on the show today.
Really my pleasure, Mark. And you know, it goes both
ways. I. The reason I'm so long winded with you is because I enjoy talking
to you and you ask great questions. Well, same here.
(26:01):
Rob Markey, thank you so much for being on the show.
Awesome. I hope you enjoyed this episode of the
Delighted Customers podcast. It would mean so much. If you would take a
moment to subscribe, you can go to Apple, Spotify,
Amazon Music, or wherever you listen to podcasts. Click on the plus
(26:22):
sign or follow button and that will ensure that you don't miss an episode and
it helps get the word out to others. While you're there. I'd love it
if you'd leave a five star review. I look forward to seeing you back
here next Thursday.
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