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The One to One (near) Future, with Don Peppers
43 Plays7 months ago
You don’t need a management consultant to tell you that customer experience is important in 2024. It was not always the case. In fact, before the CRM revolution of the early 90’s, experience was a word seldom heard in boardrooms.
In this very special episode, host Will Kingston is joined by the man who is widely credited with launching that revolution, Don Peppers. Don’s first book, ‘The One to One Future’, co-authored with his long-time collaborator, Martha Rogers, put customer relationship management on the map. Inc. Magazine's editor-in-chief called it "one of the two or three most important business books ever written."
He has since authored or co-authored a legacy of international business best-sellers that have collectively sold over a million copies in 18 languages. Research by SatMetrix in 2015 ranked Don and Martha as the world’s #1 "most authoritative experts on customer experience."
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Transcript
Introduction to Aquas Cortico X
00:00:00
Speaker
Aquas Cortico X is an experience-led transformation business that partners with clients and technology companies to drive digital acceleration. We are experienced activists, passionate about elevating everyday human experiences through the belief that what's best for people is what's best for an organization. Reach out to us for a chat. A link is in the show notes. Now, cue the jingle.
Historical Shift in Marketing
00:00:37
Speaker
Hello and welcome to Speaking from Experience from Aqua Scortico X. I'm Will Kingston. You don't need a management consultant to tell you that customer experience is important in 2024. Almost every organisation has a variation of customer centricity as one of its values. We've all read the thought leadership papers that stress that customer experience is a competitive advantage.
00:01:02
Speaker
And if only I had a penny for every time I've been told to put the customer at the heart of everything I do. It was not always thus. In fact, before the CRM revolution of the early 90s, experience was a word seldom heard in boardrooms.
00:01:17
Speaker
I'm delighted to be joined by the man who is widely credited with launching that revolution, Don Peppers. Don's first book, the one-to-one future, co-authored with his longtime collaborator, Martha Rogers, put customer relationship management on the map. Inc magazine's editor-in-chief called it one of the two or three most important business books ever written. He has since authored or co-authored a legacy of international business bestsellers that have collectively sold over a million copies in 18 languages.
00:01:48
Speaker
That wasn't enough. The management consultancy he co-founded, Peppers and Rogers, was the authority on customer-centric business strategy for over two decades. Research by Satmetrics in 2015 ranked Don and Martha as the world's number one most authoritative experts on customer experience. And rightly so. Don, welcome to Speaking from Experience. Well, thank you for that very flattering introduction. Well, very nice.
Don Peppers: A Pioneer in CRM
00:02:13
Speaker
Thanks.
00:02:13
Speaker
Of course, it's a privilege to have you on. I'd like to start by going back in time. Sure. In the 80s, you started your career as an admin. Yeah. At that time, most businesses followed the time honored mass marketing approach. Picture product to the greatest number of people. Right. The one-to-one future flipped that paradigm on its head.
00:02:35
Speaker
It advocated for share of customer. It advocated customer loyalty. It advocated speaking to one customer at a time rather than just share of market. I'm fascinated. How did you get to that point? What were the early experiences that shaped that philosophy? Well, it was actually a realization that happened almost all at once.
Foundations of One-to-One Marketing
00:02:56
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My job
00:02:57
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at the ad agency that I work with was not just managing an account here or there, but also was trying to get new clients. So I spent my mornings making cold calls outbound to advertising managers, vice-presidents of marketing and others whose names and numbers I got from an advertising directory, right? And I had a three-ring binder and if I reached you on the phone, I'd introduce myself. We'd talk a little bit and I'd write down anything you told me in a three-ring binder with your name on it.
00:03:26
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And six months later, I call you back and say, hey, Will, it's Don Pepper's again. Remember me? How'd that product launch go in South America, was it?
00:03:34
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I just wanted you to take my call if in fact I read that your account was up for grabs. That's what I wanted, right? And I was pretty successful.
Technology's Role in Marketing Evolution
00:03:45
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And then one time the American Advertising Association asked us, my agency, to give a talk on the impact of interactivity on advertising. This is in 1989.
00:03:57
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and advertising people thought interactivity, when it happened, it would work like this. You'd be seeing a commercial on TV and you want to get a coupon for the product, so you push a button and a coupon would print out of your set-top box. That was the traditional description of interactivity. But I did a little thought experiment myself. I said, you know, let's imagine that a child could talk back to Tony the Tiger in a Kellogg's Frosted Flakes commercial.
00:04:27
Speaker
What would Kellogg do with the child's feedback, that interaction? What benefit does Kellogg get out of that? And the answer is no benefit because it's not representative, that interaction. It's simply anecdotal. And in the mass marketing model, it had no value at all.
00:04:44
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But that's exactly what I was doing in my business. I was trying to get feedback so that we could have a conversation later and I was trying to build up a context of a relationship so that insight was that when interactivity happened
00:04:59
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All businesses would be trying to build relationships with individual customers one at a time using computers and mass customization technologies to change how they treat different customers differently so that I could get back to you with, so how did that product launch go in South America?
00:05:20
Speaker
How did that toy work out for you when you got it? That was the insight. And so I gave this talk at the Ad Agency convention in 1989. And it was popular. And I gave it once again in Ohio. And a woman came up to me afterwards and said, you should write a book on this. I said, I'm busy. I'm in advertising. I had a busy, busy person.
00:05:45
Speaker
And she said, well, I'm a marketing professor down the road at Bowling Green State University. So would you like to team up? So we started faxing things back and forth. And that was the beginning of our book, Martha Rodgers and I.
00:05:59
Speaker
that relationship with Martha is one of the great partnerships in modern business. It's interesting you mentioned that technology at that time was a fundamental pillar of one-to-one and being able to personalise engagement. Yes, definitely. At that time, the technology was facts and those big brick cell phones. As prescient as you are, you couldn't have imagined a future which is around digital and AI and smartphones. Well, let me fill in a little more if you're interested in the history because
00:06:25
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I gave that talk at the agency convention and I took questions. And I had mentioned that there are all sorts of interactive devices out there that are like fax machines or interactive devices. And, you know, they were spreading around the world. The fax machine was in danger of putting the telex business out of business, which it did eventually. And so a man stood up and said, well, but nobody has fax machines in their home. You can't expect that to be interactive.
00:06:55
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Now you may not know this, you're too young, but there was an entrepreneur in the advertising business named Chris Whittle. Chris Whittle had a business. We put televisions in classrooms around the country and it played educational programming for classes on demand and the only thing he asked was,
00:07:16
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that the televisions run one minute of advertising for every hour of classroom instruction, and the advertising paid for that. I said, so imagine, whatever his name was, imagine an entrepreneur coming in, putting fax machines in people's homes. All you have to do is take an ad on the fax, and I said,
00:07:37
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Nah, that will never happen. But I went back home and I called a good friend of mine, a guy named Chip Belitzer, and he and I created this new business idea and wrote a business plan for it, Home Facts. We put a fax machine in your home.
00:07:52
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And you don't have to pay for it, and you don't have to have a separate phone line. When you get home, if you want to see the faxes that have been sent to you, get on your fax machine, speed down this number, the faxes will be downloaded to your machine. Also, with a page of advertising a day, right?
00:08:08
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And that pays for the machine and we would put fax boards up in every town so that if you were the local pizza parlor you could post your menu on our fax board and people could call it down by simply looking up in our home fax delivery and downloading it to their fax machine that was the idea now we're really glad we never got the funding for this.
00:08:30
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because we could have been put out of business immediately by the internet. But you can see that the Homefax model, which sort of guided Martha and me through how interactivity would work, is very similar to the World Wide Web model where you have a website. Basically, in interactivity today, you have bulletin boards and message, right? Anyone can look at
00:08:56
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You put a bulletin board up, and you own what's on the bulletin board, but anybody can look at it. Email, anybody can send you the email, but only you can see it. And that's the way interactivity works. So we sort of visualize that. And we were very fortunate because the book came out in August 1993. And I still remember the very first book review we got from Fortune magazine. They called our book Obnoxious.
00:09:21
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I remember that word. It wasn't a very long review. But then, literally, two weeks later, Tom Peters picked it as a book of the year. And three months later, the first commercial web browser was made available through HTML language. And the web thing was off and running. And our book became a must-have book for webmasters. Remember the term webmasters from a long time ago? They used to call them a webmaster because you're a master of the web. Anyway, so that's kind of that. We were off and running then.
AI and Customer Engagement
00:09:51
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We are now again at another stage when it comes to technology. In a world where increasingly AI will dictate the nature of customer engagement, the role of people, of humans, if any, in that AI-led world.
00:10:08
Speaker
I think that the availability of this technology has changed the dimension of business competition fundamentally. And the reason companies all over the world are talking about customer experience is because they can. It wasn't possible in the age of mass marketing, mass production, mass distribution. You tried to decide what the most customers in your target market might want
00:10:33
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and you create a product with that and you promote it to everybody and your unique selling proposition, right? The USP, it's unique to the product. It's not unique to the customer, it's unique to the product. But now we have a world where I can actually interact
00:10:48
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directly with a company. Now that may be through the app on the company, right? It could be a chatbot, perhaps, but it's an interaction with that company, with a representative of that company, even if it's a machine representative. Sometimes it's a human representative, but that representative encodes
00:11:07
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that company's ethics and reason for being and so forth, but it also can keep track of me. It recognizes me as the person who was on the chat two days ago or was maybe even at the call center talking to a live human being.
00:11:23
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So fundamentally, it can build a context into the relationship. And so the relationships with customers have a increasingly rich context. I heard somebody give a really good example of what context means. He said, imagine you're listening into a breakfast discussion by a husband and wife, okay? And all you hear is the conversation. Honey, where'd you put it? You know where it is, dear. You know where it is. I looked there. Well, look again. You'll find it. What were they talking about?
00:11:53
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Nobody knows outside of them. They know what they were talking about because whatever it is, is something they've been talked about in five or 10 or 100 previous conversations. It is a context and a relationship. And so the greater the context of your relationship with the customer, the more the customer teaches you about what they want,
00:12:15
Speaker
the more loyal that customer is going to be with you because to reinvent that context somewhere else, they got to teach someone else what they've already taught you. They have to get divorced here and get married over here to reinvent that context. See what I'm saying? So that's the real advantage of one-to-one interaction. It's not that it's one customer that you're talking to, it's that the customer is talking to you and you're using that data back for the customer. That's the real benefit here.
00:12:46
Speaker
There is a step change in the level of customer understanding that organizations can have access to. On this, there is an old maxim, you can't manage what you can't measure.
Rethinking Customer Metrics
00:12:56
Speaker
You've actually said that's bad advice. Terrible advice. I'll give you an example. You can't measure a customer's lifetime value, can you? Not technically, because the lifetime value is in the future. It's impossible to measure a customer's lifetime value.
00:13:11
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But you still have to visualize the customer as like a little bundle of cashflow. And the better you treat that cashflow today, the more the cashflow will benefit you tomorrow. Now, just because you can't tell how much that is doesn't mean that that's not a real number. It's a real number.
00:13:29
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Fisher Black was an economist, and he and Myron Scholes created the Black-Scholes equation which measures the value of stock options, very complex economic thing. Fisher Black once said that you should consider a stock market
00:13:45
Speaker
to be efficient if at any point in time a stock price is no less than about 50 percent of its real value and no more than about 200 percent of its real value. Real value being the future stream of cash flow attributable to that particular piece of stock in your hands. That's the real value. That's the real number. Now we know that's a real number
00:14:11
Speaker
Because in 20 years, you can figure out how much cash flow that was and what that value was. Just like lifetime value. I know the lifetime value. I know a customer has a lifetime value. In 20 years, I'll come back and see how much value that was. And that was, but I just can't know it right now. And so I have a shortcut mechanism for companies wrestling with this whole issue of measuring and managing and so forth. Here's the way to manage that. You want to maximize that customer's
00:14:41
Speaker
value, the value that they create for your business. Your business goal is to get the maximum value from each different customer you are serving. That's your goal as a business. Over time, you want the maximum value. Well, on the whole, I would argue that a customer is likely to create the most value for you at about the time the customer thinks that you are creating the most value for him or her. And when does the customer think that they're getting the most value from a business?
00:15:09
Speaker
when they think the business is acting in their interest. That's when, if I think every time I interact with you, I get the benefit from it, then I'm going to want to interact with you a lot more, all the time. So it's a very easy idea, but it's what I call a non-quantitative rationale for treating customers the way you'd like to be treated if you were the customer.
00:15:38
Speaker
Okay? I would call that customer empathy, where you actually are using the principle of reciprocity, the golden rule in Christian religion, but it's in every major religion. The principle of treating others the way you are, treating your customer the way you would want to be treated if you were that customer. That's almost always going to be the most successful business strategy in the long term. Not necessarily in the short term,
00:16:04
Speaker
Because treating the customer right can cost you short-term sales. No question about it. There are companies that make a lot of business out of short-term sales. AOL was a great example of short-term selling. Where are they today?
00:16:21
Speaker
In fact, you've written a book on short-term thinking in business. This is difficult because a lot of the times with customer experience, we all intrinsically know it's a good thing, but it's sometimes hard to put an ROI on that, sometimes hard to escape short-term financial cycles. What are some principles to keep in mind to overcome the dangers of short-termism for business leaders?
00:16:44
Speaker
I think the thing about customer empathy is vital first. I think that's the first thing you really need to keep in mind. But treating customers the way you want to be treated if you're the customer or that you would want to be treated if you were in their position.
00:16:59
Speaker
is a good philosophy that could be actually a unifying force allowing the whole organization to let loose of the short-term sales idea. The other problem is a lot of our metrics are based on short-term sales and metrics are attached to compensation. Salespeople are paid commissions for winning a sale, right? Early on in my days of consulting, I did a consulting gig for MCI, the telecommunications company.
00:17:28
Speaker
They had a program they called Customer First. It was shown, kept customers longer, customers are happier, customer loyalty went up. And this is in 1990 or 91, a long time ago, and the management at MCI cut the program because salespeople objected. See, the thing is, the more customers MCI lost, the more commissions salespeople could win by getting them back. So they wanted the churn, right?
00:17:57
Speaker
And that was because salespeople are paid commission based on short-term incentives. But what if you paid your salespeople a small percentage of the customer's future earnings? It wouldn't have to be much. And you'd keep your best salespeople longer. There are many ways you could fix that. But most companies weren't interested in that because their shareholders also wanted short-term sales. Their board needed short-term sales. And having taken a long-term view
00:18:26
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of the customer's value as a financial asset, I think is a healthy idea for the whole company. You introduced the term return on customer, which plays into this story. Tell me a bit more about that. What is it and how do you measure it? Well, if the goal
00:18:44
Speaker
is to create the most value from each customer, then your financial goal shouldn't be to improve your return on investment, on every investment. You should be measuring instead your return on customer. If I buy a stock for $100 in January and by December the stock is worth $110 and it's paid a $5 dividend to me,
00:19:07
Speaker
My ROI is 15%. Well, ROC, Return on Customer, works exactly the same way. If I have a customer who has a lifetime value today that my model says is $100, and by the end of the year, I've improved their lifetime value to $110 on my model, and I've earned a $5 profit, then my ROC is 15%. Now, the thing about ROC is, the thing about customers is they are finite.
00:19:34
Speaker
They are limited. You may have millions of customers, but you can still count them, one at a time. Money is infinite. If you have a really good investment to make, you can buy the money. You can get the money somewhere. If you borrow it from a bank or from shareholders or from your uncle, Vinnie, you can get the money to do a good investment. But there's no bank that's going to lend you a few customers so you can create value and then you pay them back and customers. It doesn't work that way. Let me give you an example. Here's a really easy example.
00:20:04
Speaker
Let's suppose you have one customer initiative where it costs you $50 to make this initiative to the customer. But the customer will return a $75 benefit. So that's a $25 profit on a $50 investment. That's 50% ROI. And let's say you have a different thing where you could invest $100 per customer.
00:20:35
Speaker
And the customer returns $130. So that's a 30% ROI. So the ROI on the first initiative is clearly bigger, 50%, than 30%. So what should you do? Do you want a $25 profit? That's the first initiative. Or a $30 profit? If you only have one customer,
00:20:56
Speaker
You'd want the $30 profit, right? 30% ROI is still far above your cost of capital. It's not a problem to invest that money. If you only had one customer, you'd choose the $30 investment, which is the maximum value of the customer. What if you only have a million customers? Then what would you do? What if you only had 10 million customers? Wouldn't you do the same thing? Of course.
00:21:20
Speaker
The point is you cannot create more customers. They're not a fungible property. They're a physical, limited quantity. And you're lucky to have these customers. You want to maximize the value that these customers create for you. And that's basically the argument. Now, that's a long-winded argument. I go back to the rule of thumb. Easiest way to deal with this is
00:21:48
Speaker
teach everybody that when you're dealing with a business solution or a customer experience issue or anything else, if you were the customer, how would you want to be treated? And that's the right answer.
00:22:03
Speaker
Part of that story is customer trust and trust is a theme that flows throughout your work. The reality is that we live in a lower trust world today. In fact, trust in pretty much every societal institution from the media to politics and corporations is lower than arguably it ever has been.
Building Trust in Low-Trust Environments
00:22:21
Speaker
How can businesses build trusting relationships in an environment which is at the moment inherently less trusting?
00:22:28
Speaker
Yeah. Yeah. You know, it's a, it's an issuing irony. I think trust is at a lower value, even though the truth is the quality of the customer experience is dramatically greater today than it was 20, 30, 40, 50 years ago, much, much greater, better, much better customer experience today. So why is trust so low? Because the more we interact, the more valuable trust is.
00:22:54
Speaker
Think of how many emails you get in your inbox every day, or how many text messages, whatever. And the first thing you do with texts or emails is delete, delete, delete, delete, delete. You delete anything that is just out to scam you or get you to buy something or do something or whatever. Anything that's not trustable. You look for the things you can trust. And you've heard of Moore's Law.
00:23:20
Speaker
Well Moore's law, every 20 years computers get a thousand times more powerful. I call another law Zuckerberg's law. Every 20 years we interact a thousand times more with other people. And the more you interact, the more valuable trust is. And the more dissatisfied you are with the level of trust that you're seeing. Okay. And I think that's one of the things that's going on. I think I'm an optimist. I do think that eventually we will see
00:23:50
Speaker
technology come around and where we'll be able to sideline a lot of the stupider conspiracy theories and other, you know, technology that connects us all that connects Lynch mobs also. OK, basically, it's a lot easier to organize a Lynch mob today than it used to be. You know, over time, I think we will come up with technologically assisted solutions for that. But I'm not sure what they are. They could be. I imagined what, you know,
00:24:20
Speaker
Tim Berners-Lee first created the idea of hypertext in 1965. Hypertext where I could click on something on one computer and get connected to a different computer. In Tim Berners-Lee's hypertext I had to have permission to go out from this computer and that computer that I'm connecting to also had to give me permission to connect. Fast forward to 1993 and the HTML language that was produced
00:24:50
Speaker
doesn't require the computer you're connecting to to give permission. It just automatically goes there. The problem with that is now you're putting all these publishers out of business because, you know, they can't put their news, right? But you're also, you've cheapened those interactions. And now the only way to pay for this is with some kind of advertising tool. And it's a much faster expansion of the web. But imagine a web where maybe it's blockchain enabled
00:25:18
Speaker
where when I go click on a New York Times article, I get charged a tenth of a cent, say, or a penny, you know, or a nickel, whatever, right? Now, New York Times makes money, and all the publishers make—anybody who has good stuff makes money, and now suddenly the economics of cyberwar no longer work, right?
00:25:44
Speaker
in the economics of gang warfare and lynch gangs. It's not smart anymore. So I think there is a future that we can look forward to. We're not there yet, okay? We might have to go through the dark ages. I don't know, but we'll get there sooner or later. It's a really interesting example because it highlights that we can't just have technology innovation in isolation. It also needs to come with business model innovation and new ways of doing
Data Privacy and Innovative Models
00:26:11
Speaker
things. That's why I think it's fascinating.
00:26:14
Speaker
As you were speaking there, my mind went to data and privacy. So in a previous article, you said you sometimes asked if the one-to-one future that you predicted in 93 has arrived. Your answer is no, because the final prediction in the one-to-one future was make money protecting privacy, not threatening it. That still hasn't come to pass yet. I agree. Talk to me about that. Well, that.
00:26:40
Speaker
prediction, I think, is still to play out, and it will happen with the right technology. Let's suppose you have, for instance, we'll call it blockchain-enabled internet for now. There's probably something else that would work, but you want a decentralized network. In that case, there will be business models that succeed by husbanding the information that you want to your own possession.
00:27:06
Speaker
in some way that will enable you to interact more with me than with them. I sell to you the things that you want. I don't listen in. I think that there are strategies out there where you'll have
00:27:26
Speaker
players to do that. When Martha and I wrote the chapter, we didn't know what it would look like. We felt that interactivity would have to have some
00:27:38
Speaker
big organization under it that sort of helps that, that balances it. And we felt that the right organization would be one that protects your privacy. And again, we're visualizing home facts. Home facts would never let somebody outside of the network contact you for advertising, a purely junk mail.
00:28:01
Speaker
because it would be a corruption of our network. But we were the Papa Bear in this thing. And right now, the internet has no Papa Bear. So I'm not sure how that privacy projection will come to be. But eventually, people will demand it. And so business models will have to
00:28:26
Speaker
I think Apple may be not a bad model for making money by protecting privacy rather than by invading it. I think Apple, the Apple iPhone compared to the Android phone from Google.
00:28:39
Speaker
It's ironic that the Google company that was founded on the principle of do no evil is now doing exactly that. Why? Because it's profitable. That's why. But I often end my talks by saying, in the future, you want to be Apple, not AOL. Apple always focuses on the user experience, 100% on the user experience. They're maniacal about it.
00:29:08
Speaker
early 2000s when Apple was coming out with a MacBook that used Intel chips and somebody was rating it. A couple of the stock followers downgraded Apple stock because they were late on the chip and it was coming out later than it was supposed to.
00:29:30
Speaker
analyst upgraded their stock because they'd called Apple to try to order the new MacBook and the person who answered the phone for Apple at the call center said, yes, sir, we have something that will do that. But I think you want to wait for the the Intel chip and that won't be for another two quarters.
00:29:46
Speaker
And if you call back then, you'll get the analyst analysis was, what kind of company would turn down a $2,500 or $3,000 sale right now in return for a customer's future happiness? A company that's going to be around for a long time, that's what kind of company. And they upgraded Apple
Conclusion and Listener Engagement
00:30:07
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stock. And I think that's a really good anecdote. And I think if you want my advice as a business,
00:30:15
Speaker
Be Apple, not AOL. You're right. That is a lovely anecdote to end on. Don, I think everyone who has listened to this would be well aware that you remain one of the great business minds of our generation. Thank you very much for coming on, speaking from experience. Keep doing what you're doing. Thank you, Will. Good luck.
00:30:35
Speaker
Thank you very much for listening to this episode of Speaking from Experience. If you enjoyed the show, please leave us a rating and a review. And if you really enjoyed the show, reach out to us for a chat. A link is in the show notes.