Published on the 31/05/2023 | Written by Heather Wright

A three cylinder empathy engine…

Local companies aren’t lacking the data required for great customer experiences, but they are lacking the ‘empathy engine’ that powers great customer experience.

That’s the view of Riccardo Pasto, Forrester principal analyst, who outlined how companies can build that three cylinder empathy engine at the recent Forrester CX APAC conference in Sydney.

“The real issue is not lack of data, but what to do with that data.”

While a Forrester survey saw companies saying a lack of customer data, understanding of customers and the context of their journeys were among the main obstacles preventing their organisation from improving customer experience (CX), Pasto has a different view.

“I would argue that the real issue is not lack of data, but what to do with that data – acting on the data we collect,” Pasto says.

He noted the ‘rivers of data’ coming into organisations, but an inability to link that data together in a meaningful way to produce actionable insights to motivate stakeholders to take action.

Forty-three percent of voice of the customer and CX professionals can’t meaningfully act on the data they collect according to a 2022 Forrester report.

Pasto’s response is that empathy engine, comprised of three ‘cylinders’ of customers, employees and partners, and senior leaders.

“The fuel that goes into that engine is customer insights. Employees must be able to collect and analyse customer data to create insights for senior leaders who will then make business decisions – for example prioritising specific initiatives. Then they will also embed those insights into day-to-day operations across the organisation by creating say a governance system for strong cross functional alignment.  

“And then last, but not least, you will have your employees and partners being able to design and deliver the best possible CX based on the available insights, available processes and capabilities at that point in time,” he says. 

“The empathy engine requires a constant stream of customer insights – knowledge of who customers are, what they need and want from you, how they expect to receive that value,” Pasto says of the customer ‘cylinder’.

There’s no one right way to do that, he notes, saying many tools are needed in the arsenal.

“The starting point for most organisations is to have quantitative analysis to identify important elements that drive good CX and use that to prioritise the right initiatives that maximise the value for the customer and the business. 

“Then you have collaborative tools that can help you align across cross functionally, and leverage all available insights to design and deliver the best possible experience.” 

While the quantitative tools include surveys, driver analysis and behavioural analysis, collaborative examples include journey and empathy mapping and heuristics evaluation. 

But Pasto cautions that those two prongs are not enough. 

“In order to better connect with the human side of insights you need to widen your aperture with immersive and observational tools that enable us to gain more context from seeing customers using our products and services in their own environment.” 

Pasto outlined some local real-world examples of best practices across each of the segments, including NRMA’s use of a voice of the customer platform to aggregate insights from surveys, complaints, social media and third party review websites. The team then measured customer satisfaction and NPS scores to deep dive into the specific drivers affecting CX the most. 

The NSW Government combined quantitative and qualitative research in its effort to paint a better human picture and foster empathy for customers across departments and agencies, layering stories from interviews with customers on top of hard data from surveys. 

Pasto says that ‘story telling’ aspect is crucial, with good stories helping us remember and fostering empathy for others.  

“Data and quantitative research are really good at telling us what we need to do. But we also need storytelling and qualitative research – the tools that are really good at telling us what, why and how,” he says. 

Australian superannuation fund Colonial First State and Kmart have taken things a step further. Colonial challenged senior management to live on a superannuiants funds for a week, while Kmart sent head office staff to stores to connect with customers first hand. 

Customer empathy, however, is only part of the story, Pasto says, with the second cylinder being employees and addressing how to better empower and enable employees to deliver great CX. 

“Customer experience and employee experience are two sides of the same coin. There is always an employee behind every single customer experience. 

“Yet we often force employees to cope with patchwork of training, policies, tools and techniques and the end result is if you make employees feel disconnected, purposeless, confused, chances are customers feel same.” 

He noted the need for companies to empower employees to make decisions and act on the spot as problems arise; to proactively articulate to employees how they will benefit from changes such as automation and chatbots, and to provide upskilling and growth opportunities as part of having empathy for employees. 

The next piece of the empathy engine is senior leaders – and essentially, it’s about finding ways to get them excited about CX, but also linking CX to their success. 

“C-level execs, often profess love for customers but their statements don’t always fund CX budget. Without that budget, governance and alignment, your efforts to improve CX are doomed.” 

So how do we get their attention? 

“Show me the money! We need to be able to articulate the ROI of CX for them.” 

But while that’s theoretically a very simple formula – just define the benefits and costs of initiatives – estimating cost and benefits is a challenge, Pasto says.  

Leaders, who Pasto says are usually quite good at estimating the costs of initiatives, are often quite bad at estimating benefits. 

“Often they have a very narrow view of benefits or potential benefits. And usually they associate CX with retaining customers and reducing cost to serve them.” 

While those are two important outcomes, Pasto argues that CX initiatives impact other categories such as your ability to acquire new customers and lower the cost of acquisitions through word of mouth for example, boosting resilience through lowering the risk of legal actions, or attracting and retaining talent. 

Creating meaningful linkages between the different metrics is the next step, he says. 

“To build an effective CX business case, you need to establish three key linkages.” 

Business outcome metrics must be linked to top-level CX metrics – or Beacon metrics such as NPS – which in turn must be linked to CX drivers (things like products and services, customer service, digital and physical channels, communications, prices and fees). 

“This analysis enables you to understand which levers you need to pull to improve your Beacon metric.” 

Last, but not least, CX improvement projects need to be linked to the CX drivers. 

“This framework can help you see how your initiative is performing and how much it is driving better CX and outcomes.” 

He cited Westpac as an example of an organisation doing a good job of making the linkages clear. 

The bank’s annual report links customer complaint management initiatives to their core goals as an organisation, identifying specific areas such as fixing customer pain points and reducing complexity, with KPIs reflecting those areas. 

“Not only that but they have embedded some of those KPIs into the balance scorecard for directors’ renumeration,” Pasto notes. 

“Our three cylinder empathy engine propels our CX transformation forward – empathy for customers, empathy for employees and empathy for senior leaders.”