The strategies, as mentioned in the previous post:

1. Innovate your way out
2. Optimise, to squeeze more from what you have
3. Cut costs by improving the customer experience

Let's take a look at strategy 3.

Cut costs by improving the customer experience

Customer experience got a mention in the previous post. It's the idea that every interaction that a customer has with your organisation, via whatever channel, contributes to the impression they form of your brand. Your branding and advertising makes a promise. Customer experience is about delivering on it.

There are two ways to use customer experience design to save money:

1. Encourage your customers to migrate to lower cost channels
2. Reduce the overall service load by building a customer experience that works

Encourage your customers to migrate to lower cost channels

Many businesses have found that the web is now channel to market. That's great, customers love the flexibility and business love the cost savings. So, to reduce costs in a downturn, make sure that your customers migrate to the channels that cost you less. Hardly rocket science.

But actually getting customers to migrate can pose a challenge. How do you persuade them to move?

Some businesses have been known to deliberately increase call queuing times to encourage customers to try online self service. This is a good way to annoy customers. Others have tried customer education campaigns - generally a good way to bore customers. In reality you can't force people to use a channel they don’t want to. You can only entice them with a great website customer experience.

A great example: British Airways. Their strategy is to reduce the number of staff on check-in desks. To do that, they need to reduce the duration of each customer check-in. And to do that, they need to get customers to adopt online check-in. The BA.com website has been steadily optimised over the years. It has reached the point now where I actively choose to fly BA, just so that I can use their online check-in. It's easy and clear, you can select your seat easily, and you get to zip through check-in quickly. They've enticed me to use their online channel and everyone wins.

Reduce the overall service load by building a continuous customer experience

When things go wrong, customers want to talk to a human being quickly and set things straight. Enabling human contact is a reality of delivering a good overall customer experience. But a typical call centre call can cost between 7 and 20 pounds to handle, when you factor in facilities, training, salary and benefits. So avoiding the events that generate call customer service calls is very important for controlling costs.

Customers call when they encounter a breakdown in the continuity of a customer experience. A breakdown can occur at different levels:

• Within channel: Eg. One member of staff has no information about a previous conversation with a customer. This kind of stuff is quite rare, mercifully.
• Between channels: In one project, Flow found that customers referred to the online channel found registration so difficult and confusing, they had to call the call centre back to get help.
• Between organisations: In one Flow project, we discovered that customers could not top up their mobile phone accounts because the 3rd party retailer they had bought from had not correctly registered the sim card and provided the customer with a PIN. Another example: incorrect payment details on an airline website generated calls to a the airline, but also to the customers banks.

How to build a continuous customer experience:

• Hunt down the discontinuities. Look at call centre logs. Look at website logs. Interview retail staff. Run a research project to get "mystery shoppers" or real consumers to try the process out for you.
• Work out the cost of the discontinuities. How many calls does it take to address the problem? What opportunity is missed if the customer fails to resolve the issue? How many customers are encountering the problem? Multiplying the numbers up will give you a rationale and a business case for choosing particular problems to address.
• Fix the discontinuity. Often, a small fix makes a big difference. Making sure a piece of information is made available in the right place at the right time often does wonders. But sometimes the fix will require major system alterations. If those changes can't be justified or undertaken in the short term, look for a way to patch the service: a work-around. (I blogged an amusing example of this a while back: Microsoft's new software boxes are hard to open, so Microsoft patched the issue and published instructions online).
• Measure the results. To prove the project made a difference, look for reductions in the relevant call types. Look for increases in usage of the problem channel. And the most powerful evidence of all: look for improvements in your bottom line.

Organisations that work to improve the customer experience benefit from reduced costs. They can entice customers to the most cost-effective channels and they generate fewer negative customer experiences and fewer expensive service calls.

The strategies, as mentioned in the previous post:

1. Innovate your way out
2. Optimise, to squeeze more from what you have
3. Cut costs by improving the customer experience

Let's take a look at strategy 2.

Strategy 2: Optimise to squeeze more from what you have

This is primarily a marketing strategy. The idea: find out why your customers buy, and what stops them from buying. Then do more of the good stuff, and fix the bad stuff.

Digital marketers make a lot of noise about acquiring new customers. That's certainly an essential element of a successful business. But keeping your customers happy when they get to you is worthy of at least as much attention. There's a rule of thumb: acquiring a new customer is 6-10 times more expensive than retaining an existing customer. So a solid strategy when times are hard is to plug the holes in your "leaky bucket," and stop website visitors from pouring out as fast as you can pour them in.

(The data that actually supports the rule of thumb is hard to come by. And I think the cost of retention is tricky to calculate because customer retention comes from good customer experience, and that comes from every area of your business. But there is some useful data quoted here at Wikipedia).

The key words: conversion and loyalty

Conversion is about making a prospective customer actually complete a transaction and buy something from you. Loyalty is about bringing them come back to shop with you again.

Ways to improve online conversion

Some good, cheap tactics:

• Take a look at the findings on Marketing Experiments, optimise your product lists [PDF], and generally follow e-commerce guidelines
• Look at data such as search logs, web analytics
• Run A/B testing to get data comparing the success of different site designs.

But there's a problem. None of them ever brings you into direct contact with target customers. And that means that although you when customers drop out, you never know why customers drop out. What was missing from the product descriptions? How did the buying process not match customer needs? What did competitor websites do for them that yours didn't?

The best way to optimise is to mix stats with usability tests. Stats tell you what is going on on your site, and where trouble spots may lie. Usability tests tell you what the causes of the problems are and what customers really want from you.

So. Killer tactics to really improve conversion:

• Run face to face customer tests to understand usability, customer intention and customer workflow
• Use intercept and track tools on your website to mix free-form response with clickstream recording

Ways to boost loyalty

Loyalty comes from an emotional connection. Here are some things that cause positive emotions about websites:

• Human engagement. Two good solutions: an approachable style and an online community. (Firebox.com is a good example of both).
• Polite interaction. As customers we want suggestions and ideas, but we want to stay in control. We don't want hard sell, intrusive questions or spam. If we feel free to walk away, we feel safe to come back.
• Getting what you want. Google has built the world's most powerful brand by giving people the information they want reliably. And Amazon suggest books and CDs you didn't even know you wanted, but invariably find that you do. Both of these sites have gone the extra mile in making it easy for customers to find things. Because if customers can't find things quickly, they won't stick around.
• Customer-first behaviour at all touch points. As a customer, I have to know that you will look after me. If my item is lost during shipping or if I want to return it - give me the facility to sort my problems out quickly and efficiently online. And of course, Amazon is reknown for the high standard of care they offer right through the customer experience. And they're looking good because if it.

Improving conversion rates, and building customer loyalty are really important strategies for surviving and prospering in a downturn. And often, its easy to make improvements in small steps too.

You'll love part 3: Cut costs by improving the customer experience.

There's a fundamental change coming in the way we interact with computers. Multi-touch and gesture are here. Although the iphone and the Nintendo Wii have already build products featuring these new approaches, it might still be 10 or 20 years before the technologies area really mature. It has taken 20 years to get this far.

Still, things are moving and there are plenty of exciting things to look at.

Johnny Lee from Carnegie Mellon University is hacking the Nintendo Wii to come up with some heath-robinson, motion-based interaction ideas - that don't cost a fortune. His efforts include the head-tracking desktop VR display and a multi-touch whiteboard.

More about Johnny Lee's projects here.

The reactable is mixing real objects and on-screen action, and doing it for several users at once.

LG.Philips have launched a mammoth-size touch screen (they only allow two touches at once, but still - not bad).

And this depth-sensing camera allows computers to track your motion in 3 dimensions. It promises Wii-style gaming, but with no remote, by the end of 2008.

Thanks to Aoife Ni Mhorain, Haroon Kwahja and Gerrit Giliomee for the pointers.

The economic prospects for 2008 don't look too promising for the world's most developed economies. We're in for a slowdown, or possibly something worse.

When market conditions change, it stands to reason that a change in strategy can make sense. I've got 3 design related strategies that will prove useful if there are lean times ahead.

1. Innovate your way out
2. Optimise, to squeeze more from what you have
3. Cut costs by improving the customer experience

There's quite a lot to each one of them so I'm going to post them one at a time.

Strategy 1: Innovate your way out

Apple provides an impressive example. Here's a quote from the San Francisco Chronicle in 2001, when times were hard for the IT industry and the whole US economy:

"Apple has maintained its workforce at about 11,000 throughout the year. In a meeting with analysts last week, Chief Executive Officer Steve Jobs said: "Almost every single competitor has been doing massive layoffs and retrenching and restructuring, but we're doing quite the opposite. We're not laying off boatloads of people. We're taking those talented people and saying that if we're going to get out of this, we're going to get out of it by innovating our way out of it."

If you have managed to put some cash put by for a rainy day, Steve Job's approach is a good way to go. But only if you know how to innovate properly. Innovation doesn't mean throwing money at blue sky projects and hoping for miracles. You can cut out masses of risk by using a structured design process:

• Contextual research. This isn't market research with surveys and focus groups. Contextual research is about observing and participating in people's lives to get the dirty truth about what they need, what they want and how they behave. The innovation often seems obvious when you've got the right information.
• Conceptual thinking. Get your team together. Have lots of ideas. Stay out of the details and explore the new and usual stuff - that's where inspiration comes from.
• Evaluation with target users. Make cheap prototypes any which way you can, and watch target customers try it out. Even if the feedback is not what you want to hear, it's better to face harsh reality in the R&D lab than out in the open market.
• Iteration. Your first attempt will be shaky. Keep testing and fixing your product's design until your customers tell you its ready.

Start now, and ride the up-cycle

Depending on your line of business, getting a new product design and launched can take a while. So innovate during the downturn, when talented staff are at their most faithful and affordable, and be in position to ride the up cycle when it comes.

When times are hard, it feels safe to keep a low profile - cut back, don't take risks. But if your current strategy doesn't fit the climate, doing nothing might well be riskier. If you'd like more insight into how innovation can help businesses prosper, Bruce Nussbaum has a list of ten books you should read.

Strategy 2 will be: Optimise, to squeeze more from what you have.