S4:E2 The Customer Experience System - Purple Goldfish Review with Stan Phelps

The oldest metric is customer satisfaction. And the irony is that when somebody leaves you, 80% of your customers describe themselves as satisfied or very satisfied. So to me, satisfaction is no longer the metric or the average that you want to track.

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The world is a noisy place, and I think as business owners, it's a constant battle to try and stand out from the crowd. To get your message heard. And I think while a lot of businesses, what they try and do is just shout louder, my guest today has found a better way. And that's really what I want to explore with Stan Phelps. He's the author of the Goldfish series of books. I think there's 11 books, maybe, with a new one coming.

Uh, 11 colors, 19 different books.

19! Extraordinary. So he's definitely an experienced campaigner on these topics, and he's spoken around the world all about various topics, but the one I want to dive into is this idea of crafting world-class customer experiences as a competitive advantage. Great to have you join me today, Stan.

Yeah, great to be here, David.

Maybe just to start, I would love to know how and why you became obsessed with this idea of customer experience.

My background for a couple decades was working in marketing. And marketing, I used to do experiential marketing. I, I worked on both brand and agency side. So a lot of my background was in sport with Adidas, the PGA of America, the New York Yankees. And for a long time, I, I started to get a little disenchanted with marketing. And it's exactly what you referred to. Marketing was, is really focusing more on the prospect and trying to shout a little bit louder and grab everyone's attention. And I thought personally that marketing should be at least as much about taking care of the customers you have and the experience that you provide them. And I firmly believe that today we live in a time where Your brand and my brand, David, are no longer what we just tell people they are. It's what our customers experience. It's how they feel. And probably most importantly, it's what they tell other people about their experience with us. And so I really just embarked on this idea of how do we do things to take care of the customers we have? Because if we do that right, they'll bring us the customers we want.

I feel like there's a couple of good examples of that that people know. One of the poster childs for me was Zappos. They were all about great customer service. I even think of Tesla. They don't spend a huge amount on marketing. They think more about how do we make the product extraordinary, get raving fans, and then have them talk about the product and invite people in. You might know that stat. I don't know it off the top of my head, but people talk about the cost to acquire a new customer versus keeping an existing one. I think it's significantly cheaper to keep a customer than it is to have to get a new one.

I'll tell you the stat that just blew my mind, because again, a couple decades as a marketer I used to think that you worked really hard to get somebody's attention and create awareness and then hopefully drive them through the quote unquote funnel to convert them to become a customer. And you spent a lot of money to do that, that they were roughly equal, David, to a customer that came from you, came to you via referral from a current customer. And the answer to the question is like, they're nowhere near equal. If I've been— if I came to Systemology from a current customer and I got recommended, I'm upwards of 4 times as valuable to you as an organization. And that's because of a couple really critical reasons. One, if I've been referred, I tend to stay long— longer with you as a customer. And so over my lifetime, I spend upwards of twice the amount of money as a traditionally acquired customer. And here's where the magic happens. If I've been referred myself, what am I more apt to do?

You're going to want to overdeliver and be amazing.

If I've been referred myself, I'm more apt to refer other people. So over my lifetime, I refer up to twice the amount of people as somebody who's been traditionally acquired. So if you do the quick math, 2 times 2, it can be upwards of 4 times as valuable over the lifetime of that customer. And so it's— it doesn't make financial sense. A lot of businesses, unfortunately, operate on what I call the leaky bucket mentality, right? Every year they're losing 20 or 25% of their clients and customers, which means they've gotta put a lot back into the bucket just to keep things equal. And so to your point earlier, my, I started this journey about 15 years ago, was to really start to look for organizations that did little things to stand out in the marketplace based upon the experience that they provided. And you mentioned Zappos is a Hall of Famer for me. And these are companies that did little things to not only stand out but also to give their customers a reason to talk about that experience.

You do cover 12 Ways to Win, and I'd be more interested in hearing about the system on how you would actually roll this out. Like, where do you get started if you were working with someone and they wanted to design a world-class customer experience? Where do you start?

Yeah, it's a great question. So the— in Purple Goldfish 2.0, so I've already even updated the original one, we have a framework or a system we call it the IDEA framework. And so there are 12 steps, but it's a 4-step process. So IDEA is merely an acronym. And so inquire is where you spend a lot of time. And inquire is about really trying to understand your customers and their needs. And we use tools like journey mapping, but we just don't journey map, we look at all of the touchpoints that our customers use with us, and we look for two very specific things in that inquire space. One, we look for what, what my co-author and I call gaps. So there are areas of kind of friction within the experience or where the customer is struggling or not getting what they need. And then there are areas that we call opportunities. So you've got gaps or areas, I, I almost like a pothole. We're all familiar with potholes. They're like that bump in the road that makes things more difficult. And then the second part are what we describe as opportunities. So it's this idea that there are key moments at different points in the journey that if you can really elevate and create like a peak moment during that critical time, it has a really outsized effect. So it's about creating the system to be able to uncover where the friction is and hopefully reduce effort, but also to uncover where there are opportunities to elevate. The experience in those key moments.

What I love about this is the way that we approach even just documenting best practice with business. Like, we start off thinking about who is it that we're looking to serve, because that ends up being— that's what we're optimizing for. Then we think about what the journey is, like what does the client or the prospect, then the client, and then the business go through to deliver that. And then you've even gone one step further, and where are the friction points? And then you're thinking about how can we insert these wow moments and magical moments in at friction points.

Yeah, and so that's the entire inquire phase. And, uh, I don't know if you're a fan of Jack— what, the late Jack Welch, GE CEO? He said something really prophetic. He said competitive advantage going forward, David, is only two things. He said, one, it's learning about your customers faster than your competition, right? Understanding them, understanding their needs. He goes, but that only gets you insight, and insight without action is just knowledge. It's useless. So the second part is How do I put that into practice and how do I take action faster than my competition? And that's where the second step or the second part of the framework, the D in IDEA, is design. And that's where we really focus in on what are our most damaging gaps, right? What are our most promising opportunities And there's some great research out there. Most organizations spend 80% of their time in trying to fix the gaps. But if you do that, it's like playing— you ever play Whack-a-Mole?

Yes. Yeah.

What happens after you knock a few of the moles down?

The next ones pop up.

Yeah, exactly. It's not an or, it's an and. You should look at both the damaging gaps, but also look at those key moments and those promising, most promising opportunities. And the research will tell you that all elements of that experience are not created equal. Most of experience that your clients have with you are, is utterly forgettable. But the research will say, if you can get those opportunities right, you can create kind of these peak moments they have upwards of a 9-to-1 return on investment compared to just fixing the gaps. So it's, it's an opportunity to look at both. And what's fun about design, and this is where you can really get your team engaged, is like, it's going through the brainstorming to go, how can we solve this? And how can we come up, how can we ask really big questions to come up with as many ideas. And then simply, as a group, as an organization, picking the ideas that you want to then take to the next step in the process. And that's what we call the evaluate phase.

I know with that second phase as well, that's a big part of what the Purple Goldfish and the 12 different ways are like. They're almost like just little ways to get your brain thinking through the brainstorming session and going, oh, we could do throw-ins or guarantees, or we can make this more convenient.

Yeah, how can we manage the waiting time better? The more successful you are in business, the more waiting that your customers and clients have to do. So smart organizations understand it's about managing that time, right? Or, you know, what are ways to back up? Because people— I'm not going to assume people know what purple goldfish are. Half of them fall into a bucket that I call value, and it's the idea of how can you do little things to add value and go beyond just the transaction. And it's based on a word that comes from Louisiana in the US, New Orleans specifically. Called lagniappe. And it literally means the gift or to give more. And anytime somebody does a little something extra, that's lagniappe. And it's so important because this concept is not new. It's been around for almost 200 years, right? Early 1800s. And you knew everyone you did business with. So the practice, at least in Louisiana, was as the merchant, as the organization, that when you did business with somebody, it just wasn't transactional. The business did a little something added to honor the relationship, almost to build a little bit of capital, right? And so half are on the value side of the equation, and then the other half are on what we call the maintenance side. And that's more about the effort that someone has to do with you and how do you do little things to hopefully reduce the effort that they have to go through or at least make it a little easier for them as they do business with you.

Yeah, I love this. So for those who are familiar with my work with Systemology, this falls straight into the Optimize phase perfectly well, because we talk about first we capture what we're currently doing and making it repeatable. That becomes your baseline. And then further down in the process, we then look to optimize, which is now we're looking for where are these friction points, who are we trying to create this experience for, where are some low-hanging fruit and ways we can add value and improve that maintenance bucket. And then once You work with your team and you identify those key areas. What's that next step?

So I'll take you through evaluate. It's a— that portion or that step in the framework is one, we talk about internal evaluation. Like we hold that idea up and say, look, given our bandwidth, given our resources, first things first, do we have the ability to be able to potentially pull this off? And more importantly, because you can't do everything, does the benefit that we think that this is going to bring, does that outweigh the cost? And if you can jump through those hoops, we can do it, the benefit outweighs the cost, we move it then on to the next step, which we call external validation. Right? So many organizations have an advisory board of key clients. They have the ability to do one-on-one focus groups or interviews. And the idea there is you're taking the idea to your customer that you've designed for. And we don't do that in a silo. We wanna make sure that what we feel and what we believe is actually validated. That the customer sees the value in it. And assuming we can jump through that hoop, which I think often is not a hard one, but we wanna make sure we do that, then the idea becomes in the last step of evaluate is how do we try to pilot this in a very small way and create some type of minimal viable solution that you can go out and learn and validate. And then assuming the pilot goes well, then you get to the fourth and final stage, which we call the advance stage after evaluate.

That initial pilot and then running the test, you're obviously getting the feedback in. And I'm assuming as part of this evaluation process also, you're prioritizing because you're going to come up with a bunch of different ideas. When it comes to rolling these out, is this something that we do one at a time, or do we roll a whole bunch of these out? Because I'm just imagining when we evaluate, we then need to figure out, did this work, and what metrics are we looking at? And we might do one thing here and one thing here and one thing here, and then it becomes hard to know what— where the impact is coming from.

Yeah, so it's ideally I talk about this and Bain did some really good research on this, that the— where organizations fall short is that they don't develop the systems to continuously renew the experience, right? So what they might have done 2 or 3 years ago was superior or an unbelievable experience. But we know this, do the expectations of your customers, do they ever go down?

No, they're always going up.

Are evolving. So if you're not continue— if you haven't built in the system to continuously validate and to update the experience, you're gonna ultimately fall behind. So in an ideal world, you're consistently, and we're gonna talk about this after we go through Advance, is you immediately are going right back to Inquire. Right? And really quickly, not to spend a lot of time on advance, assuming the pilot again is successful, then it is the first thing that you need to do. There's three— all of these have three steps, but the first step in advance is you have to achieve buy-in, right? So you might have tested something out, but look, you've got to get, you've got to get everyone behind it. You got to get the resources allocated. You've got to— and once you do that, once you can sell it in and achieve that buy-in is the second part. And this is so key, is how do you develop the rollout, right? How do you develop the process? How do you educate and train the team to be able to deliver that? And then this is such a key thing. Third step is How do you develop the measurement of that? So when you do roll it out, you're constantly seeing if it's achieving what you want. And here is the key thing is that you go from advance, you go all the way back, you just go immediately. Think about it as like a circular, right? Circular process. Inquire, design, evaluate, advance, you just go right back to inquire, right? And you're constantly looking for ways to be able to elevate the experience.

Yeah, yeah.

I'll give a really good example of this because by way of background, when I came up with this kind of concept or idea— and again, this concept of LANYAP is not a new idea— Mark Twain in his autobiography Right? So we have to go back to the 1800s for this. He said, "Lagniappe was a word worth traveling all the way to New Orleans to get." And so I collected, I crowdsourced over 1,001 examples of this. I explained what the concept was. I said, "Look, we're all customers. When you visit a hotel, you go to your favorite restaurant, You shop online. Give me examples. And it took me over 2 years to collect 1,000, right? But what you see there are just, you see essentially the different patterns of how organizations can do this. And I'll give you a great example because I told people, don't email me, don't submit this anymore. About the 10th time I got the DoubleTree Hotel, right? And that— have you ever stayed at a DoubleTree before?

No.

They give a chocolate chip cookie when you check into the hotel, and this is the best chocolate chip cookie you've ever had. The average cookie has 30 chocolate chips in it. It's got nuts in it. They don't care if you have a nut allergy. And they're— they— it's— they have— every hotel has a little oven where they make these cookies. But think about that's around the world. Last year they gave away their half a billionth cookie. That's hard, even hard to conceive. 500 million cookies they've been giving away since 1986. And so you really have to think about if you're a global hotel chain like that, they get all of those cookies, David, from Nashville, Tennessee. There's a place called the Christie Cookie Company. They make all of the dough for the 75,000 cookies that are given out each day, and they ship it to every corner of the world. So talk about systemizing it, creating consistency. It's always given out right around the time they're handing you your hotel key. It's that nice little warm welcome and first impression that they're doing. And I tell people, first time I ever went on a business trip, I was in Portland, Oregon. I flew all the way to Atlanta, which is across the country, and the flight was delayed. I missed dinner. I was hangry. And I check into this hotel at 10 o'clock and like, I'm bummed out because all the restaurants are closed. It's 10 o'clock and they gave me one of those cookies and it was like heavenly. It was like a religious experience. And I'll never forget that. And so there are examples of little things that you do to create that great first impression.

You mentioned it a couple of times and my ears always prick up when I hear the word systems or process. We're talking about going from this idea to implementation to making sure it happens consistently. How and where do you think the idea of systems and process fits into this idea of creating these wow moments? Because sometimes wow moments feel, at least to the person on the receiving end, oh, this is spontaneous, and oh wow, this— like, they get that feeling, but oftentimes it's anything but that.

No, there's a lot of organization in the background, right, to be able to do that. So I'll give you another one that's like a warm first welcome. If you've ever stayed at a Ritz-Carlton, like, it's amazing. You walk up to the front desk, they already know who you are, and they— well, David, welcome to the Ritz-Carlton Orlando. And you're going, I'm not a famous When you pulled up in your Uber or your car or your taxi and they took your bags out of the trunk, they've created a system and a process that the bellman or whoever is helping, they immediately are looking at your luggage tags, right? And they've got a little radio. So they radio to the front desk and say, David has just arrived with his family, his wife and his son. And so they already know, and obviously they have the reservation for you, so they're starting even to get stuff ready. By the time you walk to the front desk, they're greeting you like you've just come home, right? That doesn't happen if you don't create that system and you don't create the process to allow people to be spontaneous. And I think good frameworks and systems ideally give people the ability to do the right thing if you understand, if everyone understands the intent of what you're trying to do. A big thing that drives my work, David, is that 80% of how we view people that we interact with and experiences that we have are only based on two questions. And I'll tell you what the questions are because they were key to us surviving as a species. And there are questions that we answer at a very subconscious level. And the first question is always this: when I walk into an establishment, I see someone coming towards me, the first question is what is their intent towards me? Very subconscious level. Friend or foe? And here's the second thing that you ask, and this is in a split second. You ask yourself, what's their ability to carry out that intent? Does that make sense?

Yeah.

What is your intent? Towards me, what's your ability to carry it out? And social psychologists much smarter than I am call those things warmth and competence, right? And 80% of how we view other people, over 50% of how we view organizations, just those two factors. And immediately when you walk into an establishment, you start an experience online, you're working with a client, know that very quickly. And what I love from systems and things running in the background and creating consistency is that really plays well on what I think the competence bit is, right? When you can deliver that consistent experience. Let me ask you a question though. What do you think is more important? Is it the warmth or the competence?

I would say the competence, and the reason I would say that is I know clients crave consistency. Like, they don't even need the world class or the very best if they know what it is that they're going to get consistently. At McDonald's is a great example of that. They do not make the world's best hamburger, they make the world's most consistent hamburger. So I'd, I'd probably say if that competence is consistency, that's probably where I'd lean.

Now, this is not an or question because both are important, but what do people tend to value more? The research leans on that the warmth bit. No. And be— But here is the thing, and we can't have a conversation without like AI coming into the question, is that if you can develop the systems and the framework and even leverage the technology to make sure that you are creating that consistency, I believe then it frees up time for your staff to be able to deliver those more human, warmth-filled moments.

Yeah.

And so again, it's not an or question, it's hopefully an and question. And it even, I think, places a greater premium on the warmth part of the conversation. Getting beyond just the transactional nature of business.

Yeah, reminds me of— I've learned this valuable lesson. We used to run a video production business, and I remember going out with the videographer on a shoot, and on the shoot drive there, he probably spent half an hour asking me questions like, oh, did we bring the extension cable? Did I bring the spare battery? Have I got the extra lens? Oh, did we email the client to tell them not to wear checkered shirts on screen? All this stuff. And then I remember after the shoot, I said to him, we're going to put a checklist in place for the pre-shoot checklist at the studio. So we put that in place. About 6 months later, I go on a shoot with him again, and the discussion in that car was very different. It was, oh, how do I get the best response from the actor or actress? And oh, this is the type of scene. And it made me realize there are certain things in business that just need to happen and you wanna systemize the heck out of those.

Right.

Emailing the client, giving them the schedule, the invoice going out. Get that right by a system though, and then it creates space. And space is what's needed for creativity, that human element, those magic moments that the human can add in, but they have to have space to be able to do that. So I can see how the two very much go hand in hand.

And the space— and there's a really interesting— and again, I don't want to ever say competence is not important because it is absolutely important, and you've got to remove friction, you got to make it easier for your customers to do business with you. But two things. One is there's actually a— in a— if you ever heard of this thing called the pratfall effect?

No.

And the pratfall effect is, imagine if I got up and I gave a speech, and as I walked up on the stage, like, I tripped and fell. Or during the speech, if I didn't trip or fall, I like made a major mistake or something happened. Here's the thing, pratfall effect is that people will actually view the experience better when you've made a mistake versus you came up and did it 100% perfect. And here's the other biggest big thing is what kills most businesses is when somebody is interacting with you and they sense from the person that they're interacting with that there's ambivalence. Or they're not really showing that they care. It's the greatest killer of customer loyalty and reason why people leave. And again, it's not an or question, but I think you have to be able to do both. And unfortunately, like, I would even argue that— and there's a guy named Will Godera. Do you know who Will is by chance? He wrote a great book recently in the last 2 years. It's called Unreasonable Hospitality. And Will, in New York City, helped create the number 1 ranked restaurant in the world. That's a huge feat, right? Think about your competition. And he talked about this idea of 95/5, like 95% of what you do, buttoned up, consistent, like amazing. But his argument was save 5% of your budget, save 5% of your bandwidth, right, to then be able to color outside of the lines to deliver that human moment. And there's a great story in the book how he's got a really important group that's in the restaurant and they've hit all of the main restaurants in New York City. And somebody in the group was like, they're like, he's like, oh, where do you go next? Oh, we're going right to the airport. And somehow he overhears that, like, their big regret— and this is so funny because they're foodies, right— that they weren't able to experience a New York hot dog, which you're not missing anything, but it's Guinness tastes better when you're in Dublin, while a New York City hot dog is like eating it on the street is like a religious experience. He went out onto the street to a vendor, bought 4 hot dogs, brought it back to the kitchen. The chef cut them up into quarters, created all sorts of like toppings and stuff. That doesn't work unless you have— no one told that person to go out and do that. And it doesn't work if you don't have the staff in the back that are bought into delivering that out-of-the-ordinary delightful experience. And yeah, and of course, they were just blown away. That moment of magic.

I'm imagining that's hard to quantify, that magic, as well. If business owners were to become obsessed over a particular metric when it comes to thinking about these wow experiences, what if they needed to or wanted to be able to measure this, what should they be looking at? Because that, again, some of these very fringe moments are very hard to capture and quantify. Love your thoughts on that.

Sure. So I think the oldest metric that's out there, and they're— the organization that does it, I think, is the ACSI. And JD Power, if you've ever heard that, kind of runs on this. It's The oldest metric is customer satisfaction. We want to have satisfied customers. It's been around for decades. And the irony is that when somebody leaves you, right, to go to somewhere else, 80% of your customers describe themselves as satisfied or very satisfied. Right before they F off and defect to the competition. So to me, satisfaction is no longer the metric or the average that you wanna track. And so the two numbers that I, or metrics that I like better There's one called Net Promoter. Some would call that the ultimate question, right? What's your likelihood to recommend said organization to a friend or a colleague? Or this tends to be more of the transactional one. Net Promoter, more about the relationship. There's another question that, that some will dub the Net Easy Score. Right, or the customer effort score. So your customer wants something and you follow up afterwards and you go, on a scale of X, how easy was it to get what you needed? Did you have to call 3 or 4 times? Did you have to jump through hoops? Did it take a long time to get a response? Like, with whoever you were working with, were they empowered to figure out your problem. And so I think you should measure effort, and I think you should measure advocacy, because ultimately they're the things that make a difference.

Yeah, I love that. And it goes back to something you mentioned near the start, especially the net promoter score around referrals and jumping them just being so much more valuable to the business. They're more likely to buy, they're more likely to refer more people down the line. So I think, yeah, it's actually how we got connected. Like, I— we had a mutual friend who suggested, hey, you got to interview Stan, he'd be perfect for your podcast. And it meant that I didn't have to do the due diligence that I would normally. It was like straight to the front of the queue. And I'm so glad that we were I don't get it.

We all want shortcuts, right? We all want shortcuts in life. And I call it— I have a name for it. I call it the V4 principle. Have you ever heard that concept?

No.

So I tell people, it's so simple to understand, right? You go out into the CBD in Melbourne back when you were single, and you're out on a Friday night with your buddies, and you see a very attractive person at the bar that you want to go and talk to. You get up the courage to go up and introduce yourself. Who are you to that person? It's like stranger danger, right? You're no one. You're just one of a million people, right? Or God, on this planet. Now, I tell people, like, imagine that same scenario, but as you're walking up to the bar, right? Same intent, you want to introduce yourself. The friend of the person that you're interested sees you coming and says, oh, that's David, he works with my friend, I've met him before, like, he's so cute when he's had a few drinks, right? And now you go up and introduce yourself, who are you? Yeah, you're a commodity. Someone has stood up and vouched for you. And that makes all the difference, right? That cuts through a lot of effort. And I think we live in a world now where, again, you used to be able to 50 years ago to say you as an organization, you're A, B, C, and D. You can't hide anything anymore, right? We're all more savvy. We research organizations, but nothing cuts through more than someone that we know stands up and recommends. But here's the thing, it begs the question, we all— now, this is the craziest stat I've ever heard, right? You ask anyone who runs a business, David Jenyns, what's the number one form of marketing that you do? What do you think almost 90% come back and say?

It's always word of mouth.

Referrals and word of mouth. And then you go, oh, that's it. And by the way, Google shows up at 59% as number 2. The follow-up question, oh, that's interesting, 9 out of 10. You ask then the follow-up to the 9 out of 10 who just told you it was referral and word of mouth. You go, oh, that's interesting. What type of referral or word-of-mouth strategy do you employ in your business? What percentage have that?

I ask this question all the time, and it's none. They always say, I don't have a system for referral.

3% have. Now, you mentioned Tesla earlier. I own a Tesla. Don't look down on me. But what's interesting is that they incentivize people that are current customers. Not only do they hopefully provide the experience with their service centers and whatnot, but they do incentivize. They're— they keenly are aware of how important it is to be able to give their customers and clients something to talk about, to tweet back in the day of tweeting, speaking of Tesla and Elon Musk, or to Facebook or Instagram about. And we didn't even get into my goldfish fashion fascination, but the goldfish is something pretty small, but it's— they're an amazing metaphor for growth.

We might have that as part 2 because I, I like that one. I've actually heard you share that one around, especially even for business. One of the big ones we all know that a goldfish will often grow to the size of its environment. You need to pick your markets wisely. I, we talked about a lot, and I feel like the Purple Goldfish is a shortcut for people who want to create these magical customer experiences. So I'm going to pop a link through to the book and people can check that out. If people want to follow more of your work, where's the best place for them to head?

So I, I spend 98% of my time on LinkedIn. So in terms of thought leadership, and that's in terms of the socials, they can also go to stanphelps.com to learn a little bit more.

Yeah, yeah, perfect. I'll pop links through to all of those. I appreciate your keen insights, and most likely I think we'll part 2. And who knows, we might need to work our way through the gold—

the colors. The colors. All righty. All right, thanks, Dan.

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