How Data and Analytics Inform Customer Experience
Luke Williams is a New York Times best-selling author and Senior Vice President and Distinguished Principal Analyst at Qualtrics.
In this interview, Dan and Luke discuss how X+O data analysis can inform and improve customer experience.
Dan Gingiss: We’re going to be diving deep into data and analytics and customer experience. Don’t run away because you’re afraid of numbers. Don’t worry, we welcome everybody here. We’re going to talk numbers in a way that everybody can understand. Welcome, Luke Williams. According to your title, you are “distinguished,” sir.
Luke Williams: You know, they let me make it my own fancy title. I thought to myself, “what words can I put together to guarantee that nobody would know what it is I do in exchange for money?”
Dan Gingiss: I absolutely love that. And I’m not sure I’ve ever heard anyone have the name “distinguished” in their title, but I think it fits perfectly.
Luke Williams: In the tech world, that means you’re over the age of 35.
Dan Gingiss: So, if you could quickly just tell us a little bit about yourself and Qualtrics.
Luke Williams: Yeah. I’m the Distinguished Principal at Qualtrics. I have been Qualtrics now for four years. That’s 28 dog years to regular folks. But I’ve been a user of the platform since about 2009-2010. I came up in the research and consulting world and when I first started using Qualtrics, it was primarily a survey platform. Then slowly over 10-to-15 years it started adding really cool features and things that I could really use in my consulting business. And then before you know it, they kind of figured out what it is that people were doing with the platform and said, “hey, if we engineer our product mindset towards helping people sell really big problems, they’ll get from A to B faster and they can use that leftover time to do bigger things.”
We can be a part of that value cycle. So, we’ve established with a lightning strike, the first ever idea around experience management; that there’s experiences everywhere in the world flowing through our companies, and that the better that we manage those, the faster we get the profit and the company gets the value. And that’s primarily what we build technology for is a programable technology layer now. As we move forward into the future, the definition of what traditionally we think about measuring and actioning on experiences will ultimately end up changing as a result of the diversity of opinions that we’re getting inside company now.
So that, in a nutshell, is shortly what Qualtrics does. We’re a part of the SAP family, and honestly, it is the type of place that you work that makes your socks roll up and down. It’s a pretty great place.
Dan Gingiss: That’s awesome. And full disclosure, I do some work with SAP and really enjoy it. The people there are great, the thought leadership is amazing, so it makes sense that they would have snapped up Qualtrics and you get to partner with them now. You guys use this term XM, or experience management, which I really like. I know it includes two different variables. Can you explain the math behind it?
Luke Williams: Yes, so experience management is the discipline of bringing what we refer to as “X data” and “O data” together inside of your ecosystem in order to really understand what’s happening. So, there’s two types of data in the world. The first is operational data. This is the one that companies tend to be very rich on. They spend the last 60- or 70-years perfecting things like supply chain, CRM, HCM, all that kind of binary zeros and ones, the management of the business. And companies, frankly, have had to get really good at that. Historically, this is where SAP thrives. These are the type of systems you couldn’t live without. You couldn’t possibly scale and be competitive without them.
But at the end of the day, to be fair, the market is very saturated with that. We measure whether people are going to the bathroom now in contact centers. There’s more than enough telemetry going on the O data side. But what we didn’t have was a system of record, essentially, for why things were happening. So, experience management brings in the human aspect of those very experiences. And as we started to apply them to different use cases, what we started to figure out is the predictive power of data. People starting to really understand the value of understanding supply chain, human resource, capital management.
What they figured out was that all the things that couldn’t explain revenue and profits was explainable by why things were happening. So, what we’ve discovered essentially is that if you combine O data and X data together, the predictive power, statistically, of what you’re looking at explaining the future is about 90 percent. Which means I’m only leaving 10% of the chance and competition if I do things correctly.
Ultimately, that’s the nature of what experience management is. It’s bringing more humanity to business, which is great. But just speaking for me personally, not for Qualtrics, I’m a numbers guy. My goal is to make money for businesses and to help them thrive. And I believe that customer experience, for example, is a source of competitive advantage. So, let’s be good to customers, but let’s do it in the right way that earns value for the customer in the company. And experience management is a system engineered towards doing exactly that.
Dan Gingiss: All right. So, understanding the operational (O) data, because, as you said, I think people have been collecting that for a while. Let’s dig a little bit deeper in terms of the experience (X) data. What kinds of things are you looking at? Are you talking about survey data in terms of what customers are saying? Or are you talking about tracking them on the Web site in terms of what customers are doing? Is it some combination of that? Give us a little insight.
Luke Williams: Traditionally people think about experience data as having come from service, right? This is traditionally the voice of the customer. These are your employee engagement programs. This is brand tracking, this is product testing, concept testing, things like that. But I think what you’re seeing companies like Qualtrics do as leaders in the experience management space is we’re starting to push on, OK, survey data is great. It’s one form of X data. There are maybe three or four others that are really available to us. It could be just pure text that you get through SMS text messages reviews on websites, product reviews. But it’s also through voice.
So, we’re capturing information inside of contact centers. Instead of sending 40 million surveys in a contact center, we can have a complete census of what happened because the technology exists in the A.I. world now, to have voice to text, sentiment-based analytics and things like that. And then ultimately, when you’re thinking about what is the future of X data going to be, even things like focus groups and scalable qualitative data sits inside the data realm.
Technology only does two things. It takes the things you do and makes them faster. And then eventually you start asking different questions as a result of having done those things really fast. So, the next question we ask is, as we tapped out on that, what is the future of X data? Can we collect experiences without ever having to talk to a single person? Can we use things like bioinformatics and telemetry, for example, as a vector to understanding the experiences that we’re delivering in store? Certainly, when you look at leaders in the experience world, it’s not futuristic to them. This is where we are.
For example, we’ve noticed through the security system that we have in our hotel, that somebody is in a position that they’re not supposed to be. There’s somebody standing in a position that algorithmically doesn’t make sense. They may need help. So, it doesn’t matter why they’re there. We just know they shouldn’t be there. So, then they can send a person to figure out what they need help with. And then let the human solve the problem and power that front line.
We’re starting to get away from this mindset of performance measurement only, and we’ve started vectoring more toward what is the action, what’s the outcome? What value are we going to create in the moment? And that sounds really easy to do. It’s actually incredibly difficult to do well, or to make technology to do that well. So, it’s honestly why it eats our days and nights. But the outcomes that we see are exactly that. We want to push the space forward because most people don’t understand how most of their tech works. They just know that it creates value for them. Experience management is technology for regular humans.
It’s not just for researchers anymore, which is traditionally where these types of platforms lived. But everybody needs to understand what’s happening in their business and why. So for me, this is way past surveys. Surveys are important. They are critical tools. Surveys will never die, but the misuse of surveys must die in order to preserve its value. There are moments where you just need to talk to customers. You need to do focus groups. You need to do in-depth interviews.
The easiest way to learn about a business is to sit inside the contact center and just take 150 calls. Just sit there and listen and your mind processes things, internalizes things and creates vectors and data that you couldn’t actually imagine or map. But it becomes intuitive. So the goal is to create data at scale that allows us to have that intuitive insight without having to sit through the calls.
Dan Gingiss: Now see, I loved that you say that, though. Because here you are, you’re the quantitative guy. And I find too, that even the name “voice of the customer” is a little bit of a misnomer, because you’re really generally reading something that the customer either said or wrote. You don’t hear their voice. You don’t hear the tone of their voice or hear the intonations. And when I’ve done call listening, it is absolutely amazing to hear customers and to get close to them. Or you do a focus group or you pick up the phone if you’re a B2B and you only have one hundred clients, pick up the phone and call them and talk to them. And it is amazing what you can extract out of that.
It may be a little bit harder to put into an algorithm, but I think what I’m getting from you is that it’s really a combination of lots of different inputs. If you’re depending only on a single input, then you could be making wrong decisions or you’re making decisions simply without seeing the whole picture. When you can bring in all these different inputs together, that picture becomes a lot clearer. Technology allows us to sort of solve the problems objectively, taking emotion out of it, which I think is really critical.
Luke Williams: I’m an analytics and research methods guy at heart, that’s where I came from before I started doing strategy work. But the reality of where we are now is that quantitative data gets you into most rooms. It can absolutely get you into a C-suite and in some cases can actually do all the convincing for you in the C-suite. But I’ve had plenty of experiences in my consulting life where it’s the qualitative story that that finally commits people to taking human action, which is why we’re focusing so much on creating more humanity in the data.
Here’s an example: I was working with an insurance company and we can show them the driver model that suggests the thing that’s driving the predominant amount of pain inside of your customer base is that you’ve got this snafu in the billing department. And now the CFO says “Yes, we know, billing is an issue we’re working on. It’s a big investment. We’re going as fast as we can. Honestly, this has been a year’s long problem.” OK, well, I’ve shown you all the data to get into this. I sized the problem for you. The percentage of people who are affected and the percentage of people who experience pain.
What I’m going to do now is show you a video of what it looks like when a person, a single parent, for example, receives your bill that they shouldn’t have received because it was covered. But you rejected the claim, and now they think that automatically, because they receive this bill, that they owe this money. Now they’re starting to break down crying because they’re having to make a choice between making a mortgage payment or paying the insurance bill or the medical bill. Then you imagine that person crying and trying to cry quietly so their three kids don’t hear them. All of a sudden, the person gets it. It’s not that I’m creating pain in my customer base. It’s that I’m creating pain in the human world.
We have to create human stories. There’s a thousand ways to do it. For me personally, it’s quant and qual together. In the data world, we refer to this as triangulation. Using triangulated methods is the most effective way to tell a story because it covers every angle for every version of human understanding. If you’re the type of person who sees it and takes the quantity and runs with it, we have that all the time.
We’ve got tons of people in the world who want or receive information that way. But the way that I describe it to people is that you have to fish where the fish are, the way that people want to be fished. Some people need a story. So that’s what gets the job done, that’s what gives you permission to take action. Give them what they’ve got to have. And for me, you can’t come with one tool to any serious decision. Fifty million dollars are bigger. You better have it right from a thousand angles.
Dan Gingiss: You remind me of something. In my own career, my first boss on a college went to the same college that I went to, was four years older than I was, and we got along great. I used to go into his office, sit down, shoot the breeze, throw out a couple of ideas. Take his temperature, so to speak. He’d be like, “Yeah, I really like this one.” And I’d leave and I’d go do it. And I loved that because I just loved having the conversation.
Later on in my career, I started doing that with a different boss of mine. And every time I went into her office and said, “Hey, you know, I like this idea and this idea, this idea,” she’d shut down all of them. I was confused, because I thought these were great ideas.
I finally figured out that that was not the way she liked to be communicated with. So instead, I went back to my desk. I created a one-pager on each of these three ideas, made it really crystal clear why I was doing it, what I wanted to invest and what I thought the outcome would be, and went back to her. She approved all three of them immediately. And it was just because I was presenting it in the wrong way for her. Whereas with my first boss, that was exactly the way that he and I communicated with each other. And I really learned to think about the fact that with anyone I’m talking to: a boss, a client, a business partner, a colleague, you have to know how people want to be communicated with if you’re trying to convince them of something.
There are some people that are very right-brained and only want to see the numbers. And no matter what you do, they’re not going to shed a tear when they see that lady cry. And then there’s the other people that need to see that human story to really be pushed over the edge and then maybe the numbers are the confirming factor. But the story’s actually the lead. And so, I think it’s great that what you guys are doing is presenting both sides of it so that the client or the business can really choose how to talk about it with whatever person they’re trying to convince. And sometimes you may need only the X data, sometimes the O, and sometimes the combination.
Luke Williams: I’m going to mash this up. This is going to come out terribly, but there is a quote from Mark Twain that was more along the lines of “there is no difference between the illiterate and someone who is literate and doesn’t read.” Right? So for us, the data are extremely powerful.
But if you can’t deliver that to somebody in a way that is designed or orientated or aimed directly in action, you’re not getting the full value of that data. And then it becomes an investment whose ROI is not fully realized. And in a business environment today, and it’s always been true, that you go through waves of levels of scrutiny. People become profligate for a while then everyone tightens down for a while. But at some point in time, you got to pay the piper. And there’s no better way to call budgets into question than to have lots of things that you don’t know how to use.
So, for us, our goal is not to force people into a world where they have to communicate in terms of technology. The technology has to wrap around the business problem. Right. And it has to wrap around the user. It has to be something that is material to their every day. And I feel like that’s probably true for a variety of technologies. But I think that’s just generally true for anybody who wants to run a business, right? You can be a florist or run a hotel. You do whatever you want. If you can’t figure out where you fit into the customer value chain, you’re going to have a struggle and you can see it all the time.
And you probably had, you know, 30 or 40 examples just from the last month. There’s a retailer out there right now, and it’s on my list of people who I don’t like very much. Essentially their whole thing right now is, “We’re jammed up on calls. So we’re only taking calls if you’re calling to cancel an order.” That’s good. You must have a lot of money in the bank.
Dan Gingiss: That makes total sense. Or there’s a particular brand that I happen to really like and order from a lot that’s been out of a particular product. And there’s literally no communication. I have to check the website every day and hope that it’s in stock today. Otherwise, I check it again tomorrow. There’s no, “We’ll let you know when it’s back in stock” or “Why don’t you sign up and we’ll ship it to you every month as long as we have it.” There’s nothing. It’s all left to me to figure out whether I can order it or not. And it is immensely frustrating.
One of the interesting things for me is that, at least in my business, since COVID hit, customer experience has been brought to the forefront in a way that those of us that have been in CX for a while have sort of been shouting from the rooftops. And now everybody’s sort of focusing on it, which, of course, is a great thing. But I think a lot of it is because customers have been hyper sensitized, good and bad, to the experiences that they’re having right now.
What I keep telling clients is that the experience you provide when the chips are down, when things are tough, when people are stressed, is going to have a huge impact on whether they decide to continue doing business with you when things are good again. What have you seen since COVID-19 that has changed in terms of what you see your clients doing or how you see customers reacting?
Related: What’s Next After COVID?
Luke Williams: I would speak more generally, but the way I see it, a couple of things are true. I don’t think anybody has to explain what digital transformation is anymore. That’s a fairly pedestrian observation. But it bears repeating because you cruise on websites, you hang out on LinkedIn, you hang out on Twitter and you see what service channels look like. And you can see that there is a lot of stress and people trying to figure out how to put this plane together while flying it. People who had already sort of started down that path are probably in a better space.
These are the people who intimately understand that there’s a connection between the digital experiences that we’re delivering and the amount of contact center volume that we’re getting. Because we’re not investing correctly over here, we’re generating costs over here. And then the other thing I would say is that from an actual consumer standpoint, we saw this spike in forgiveness. Right after COVID we saw people were much more willing to forgive a brand for these types of issues.
This is true of humanity. When life hits the fan, people get really nice. Like “Listen, I get it. There are bigger issues in the world. Go home, hug your kid. It’s not a big deal.” And honestly, striking up a personal connection with somebody on the phone and customer care front line can actually create loyalty in that situation. Even though you’ve completely failed to deliver on every other aspect. But like all things in humanity, if it’s been six months…what’s with the delay? You haven’t figured out your supply chain in six months? And I think there’s a lot of misnomers about what people think is happening in the market right now.
People seem to think that the market’s tightening when the data doesn’t really suggest that. So as many people who have spent less, have spent more. So, 70% of the market is spending exactly the same or more than they did before. And what a lot of people are lost on, is thinking that if you’ve gone through this for six months, that most of the change that’s going to have happened has already happened. But that’s not true either. Something like 25% of the consumer base out there in the world is not only having not yet changed, but they’re actively looking to change. Which means 25% of market share everywhere is basically up for grabs.
So, the thing that I want to impress on people listening the most is, it’s never too late to pick up a shovel. If the best time to plant the tree was 100 years ago and the second-best time is today, just go. And if you’re looking for data to make investments, or if you’re looking for data just to reconfigure how you’re already investing, the data probably exists. Companies generally only care about five levers in the business. Right. It’s always going to be market penetration, share of wallet, average customer value, cost, and time. You can target all of your efforts to at least two of those things.
So for me, that’s been the most astonishing. Companies have started to reconfigure what it means to be in a defensive posture. And then, we expect this cycle to go down some kind of scientific breakthrough, some kind of market breakthrough. And then things are going to take off. The people who are going to be ready for them are the people who are creating red teams right now and saying, “Dan, your job right now is to assume that the pandemic has ended. How are we going to be competing when we start accelerating out of this thing?” And the best competitors in their markets have already put together those teams.
They’re the ones who are thinking really forward about what the future of customer experience has to be. Where are we going to land on the other side of this? Have we figured out that the way that we running our business was not as swift as it could have been? Are there better ways for us to do this? That’s what I’ve been most struck by. And the other thing I would say, just on a personal note, is how resilient people are.
People are really just hanging in there. There are a lot of folks, myself included, who are very fortunate to get to work from home. And a lot of people who aren’t directly affected; their job isn’t personally affected, probably have family members who are affected. The level of humanity that the world has displayed has been, even with everything going on in the world, I still think it’s high. I think everybody can settle on the idea that certain medical threats to the world, whether it be cancer, whether it be infectious disease, like everyone’s on the same page about them being bad. Which means we’ve got a place to start from. So, that’s kind of like my personal take away in the world.
Dan Gingiss: Absolutely. I agree. And certainly, if that is not the exact reality, particularly in the United States, it should be.
So Luke, I want to pivot to one more thing because we only have a couple more minutes. Now, you are a New York Times best-selling author and your book is called The Wallet Allocation Rule. I would like if you would tell us what exactly is the wallet allocation rule?
Luke Williams: The wallet allocation rule was a mathematical discovery that, like all good math, basically explains the world in a formula that a regular person already understands the world is behaving that way. All the biggest discoveries of ways of framing a thing that everybody kind of figured out but just didn’t quite put verbiage on it.
So, the wallet allocation rule essentially was a mathematical discovery. We discovered what was the connection between the metrics that we collect in customer experience and customer share of wallet? And essentially, it was a great formula. It’s in the book. You can find it on Harvard Business Review, it’s all free. None of it is black box. But essentially the English sentence of the wallet allocation rule is that there’s two things that influence how customers spend their share of money. And it’s just the number of brands they use and how they comparatively rank against the competitors that are being actively used. Which makes total sense. I need to focus on people.
The problem that we’ve had historically in benchmarking in CX, is that we say, every point is worth a dollar. How could that be true? Not every point is the same. These are percent-based metrics. So, until you’ve brought it down to unit a unit of analysis that actually is material in the world, you’re not going to have a reasonably observable change. People think, “If your NPS score goes up by a point, it’s worth a hundred billion.” I think that’s insane. My NPS score goes up five points a week and made five hundred million dollars extra? If it did that the stock market would crash a thousand times. The reality is that when you actually look at that on a respondent level, an actual human, Dan’s opinion of a company may have changed, but it didn’t sufficiently change in order to change his behavior with the company.
That’s what I care about. So my goal, if I want to create change in the world, has to be to understand what are the drivers of change? How does Dan understand his competitive use set and how does it compare to the three million other consumers in Chicagoland? Because I’m trying to go capture that market. What percentage of the people in that market think I’m the best? Not that my score is higher or lower, but how am I competing on a personal basis? And this is essentially this is where I got into trouble with one or two clients where, you find out “Oh, my NPS score is 85.”
By the way, there is nothing wrong with NPS. It’s is a hugely important metric that helps people stay focused on customer experience. But you have to contextualize it. So, “Hey, if I’m dealing with a financial services company that deals wealth management, our NPS is in 85. It’s off the charts.” No, it isn’t.
If you think about what it is you’re managing, you’re managing people’s ability to retire. Their expectations are pretty high. They’re not going to actually stay with you as a client, unless you give them a 9 or 10. And my question is, why is it that we’re seeing people split apart their wealth management? Why is it that I have to separate wealth managers that I’m paying two separate fees? Why am I doing that? Because I’m constantly testing the water. Maybe your 9 isn’t as good as the 10 that I’m going to get from this person over here.
So, the wallet allocation rule was essentially a mathematical approach, understanding what are the drivers of behavior versus the drivers of sentiment. Because they’re not always the same thing. So ultimately, when we think about that, what makes people happy or makes people spend, it’s got roots lots of different mathematical circles. But at the end of the day, my goal is to drive behavior and drive sentiment as well.
If I can’t drive sentiment yet, I’ll start by driving behavior. Because it’ll create capital for a business that can create better excuses later. But right now, I want to create differentiated products and experiences. And whenever we think about really tight markets, it’s because these scores go up and down. But nobody has changed position in the market. And that has to happen in order for a company to realize ROI. At least for share of wallet. Approaching brand penetration is different. These are all really important material things, because if you’re doing things to create better experiences that aren’t creating more money for the firm, you’re just generating costs.
What ends up happening, then, is that people stop believing in customer experience, which is the worst thing that can happen, because everybody can control supply chain. Everybody can make a steak, or get your package from A to B overnight. The world is competing on customer experience right now. And there’s a lot of things that feed into it. The employees, the product, the brand, how we design for human systems. And that’s where I’m focusing my time. Honestly, right now, it’s an uphill fight. Always will be. I only like big problems.
Dan Gingiss: Thank you so much, Luke Williams of Qualtrics. I always learn something from you when we chat.