How to Be In Control of Our Digital Moments of Truth
Sooooo much is done via digital engagement today by our clients and prospects that there literally hundreds of “moments of truth” for our practice on a daily basis. A “moment of truth” is that instant during interaction with our firm when a customers expectations are tested. The rise of digital interaction means that we humans are often not even fully aware of these moments of truth occurring.
The concept of the “moment of truth” was explained superbly by Jan Carlzon back in 1989. For me it was, and still is, one of the best business books I have encountered. Enlightening stuff on customer service, company ethos and values, and the roles of various people within an organisation.
It is STILL worth reading as it is even more relevant today.
In any given professional practice today we have an enormous number of digital interactions with the market. They google us and land on our websites, our blogs, our linkedin profiles and social media accounts. Presuming the search engines do their job and get the customer to the preferred site in a nano-second, there is the first of many moments of truth.
No photo? The keyword they were searching with is being used by you, but irrelevantly (or even worse; irreverently)? No contact details to take things offline and talk to the human? Click on the “contact me” button and it sends me off to another program where I have to consult with your diary to set up a meeting in 3 weeks time when all I wanted to do was ask a question?
These are just a few typical examples of what occurs when consumers using digital engagement methods encounter our business. These have all happened to me as a consumer in recent weeks, and the initial reaction on my part is disappointment or frustration….those are moments of truth. My expectations as a consumer (which I do not think were unreasonable) simply were not met…and I disengaged. And the firms whom I was seeking services from are probably still blissfully unaware….
As practitioners this should fill us with alarm. All the effort and money that goes into driving people to choose to engage with us can be wasted simply because we don’t get the initial connection point right. Our marketing has to move beyond merely attracting attention and generating enquiries all the way through to every step of the customer engagement process. Every step…every interaction…every spot they could land at…..these are all potential digital moments of truth for our business. Prospects are won or lost in these moments.
Yet, these are the easiest digital moments of truth to get right. We simply need to consider them from the perspective of the customer, apply a bit of marketing nous to the interaction process, and ensure that each of these initial engagement steps deliver what it is that the customer would be looking for.
The more challenging digital engagement areas are those that involve existing clients. Those whom we actively engaged in delivery of professional services and advice, and to whom we owe duties of care and have to consider compliance obligations together with being mindful that they are in fact the ones hiring and paying us, so we’d better be delivering the service and experience that they expect. Balancing all of those obligations in our digital engagement IS difficult, and our only real ability to manage these digital moments of truth in the client engagement or advice process is through personalisation. The personal we can make digital engagements appear to be, the greater the impact in the moment of truth. To achieve that we must rely upon having great communications systems which are backed up by significant amounts of data on our clients (how important is that CRM system?), and which can integrate to produce fast and personalised digital responses.
Even if we do that, it may not be enough.
Compounding the difficulty of the digital engagement is our reliance upon the digital interaction that our clients have with our suppliers and business partners too. In effect the insurer or fund manager whom we have recommended and with whom the client is now trying to communicate with or obtain information from, becomes an extension of OUR brand and reputation in the clients mind. To be blunt; a crappy digital engagement system from one of key suppliers makes us look like incompetents. The suppliers moment of truth actually became one for our brand with our clients.
Frankly, we have to accept that many institutions with whom we deal have archaic, hierarchal and bureaucratic communications systems, frequently staffed or supported by humans who fundamentally do not understand either the consumers or the business we are in. They don’t do digital well a lot of the time. And they don’t actually do real client service stuff well enough either, despite what their internal NPS scores or customer satisfaction surveys are telling them. While it might be acceptable to an institution to have (say) a “satisfied customer” proportion of 90%, that is not good enough for the practitioner. If the practitioner had 10% of their clients fundamentally dissatisfied by their engagement with the partnering institution then that is a pretty big problem for the practitioner.
So how can we handle these digital moments of truth when we cannot entirely control the engagement systems or processes?
Insert humans into the process. That’s the answer.
The greatest remedy we have for a client who was disappointed with the outcome of their digital moment of truth (whether with our firm directly, or by extension) is put a human being in front of them. Metaphorically speaking of course. A human who engages directly with the client is the the single greatest opportunity to take charge of these moments of truth.
That engagement can be in person, or by phone, or facetime or even 1-to-1 email or chat….it doesn’t matter. Having said that; the greater the level of disappointment on the part of the client the more personal the human-to-human response should be. Consumers generally find it relatively easy to maintain the rage via email, but not so much when face to face with another human who is clearly seeing things from their perspective and actively trying to soothe and rectify. Small matters that were disappointing can be rectified easily enough with a human from your business sending a personalised email directly to the client or consumer and fundamentally promising resolution or accountability.
The bottom line is that whether the digital moment of truth actually occurred when the client or prospect was trying to interact with our firm directly or with a firm who we partner with, the moment of truth is ours. It is our reputation and it is our customer. We wear the damage if it isn’t handled. So we must take charge of it.
While building the best digital interaction systems you can (which will be a “work in progress” for the rest of your business career by the way) you should consider all the digital engagement points where the option to revert to dealing with a human need to be. Consider all the points where the consumer can get too confused, or disappointed, or have to go through too many connecting steps to get what it was they were after and put a “contact human” option in there.
We are in the people business, or the relationship management business, after all. While we know the digital engagement will continue to increase in importance to our clients and prospects, the reality is that the more digital choice there is and the faster things work, the more opportunities there are for digital moment of truth disappointments.
That means there are more opportunities for demonstrate that we are a service business with a strong personal touch. That is no bad thing for most professional practices.
All the Talk of an Accelerating Economy and Rising Inflation Just Doesn't Add Up
The biggest news for the markets this week came from the Federal Reserve. On Wednesday, it released the January Federal Open Market Committee meeting notes and they were interpreted as dovish by some and hawkish by others as analysts raced to divine insight from the text.
The recent data isn’t supporting the narrative of accelerating global growth and inflation while equities continue to experience higher volatility. What does it mean for stocks, bonds and yields? Glad you asked! Here’s my take on why all the talk on an accelerating economy and rising inflation just doesn't add up when you look at the data.
Equity Markets — A Relatively Narrow Recovery
The shortened trading week opened Tuesday with every sector except technology closing in the red. The S&P 500 fell back below its 50-day moving average after Walmart (WMT) reported disappointing results, falling over 10% on the day, having its worst trading day in over 30 years.
Walmart’s online sales grew 23% in the fourth quarter, but had grown 29% in the same quarter a year prior and were up 50% in the third quarter. We saw further evidence of the deflationary power of our Connected Society investing theme as the company reported the lowest operating margin in its history.
Ongoing investment to combat Amazon (AMZN) and rising freight costs — a subject our premium research subscribers have heard a lot of about lately — were the primary culprits behind Walmart's declining numbers. To really rub salt in that wound, Amazon shares hit a new record high the same day. This pushed the outperformance of the FAANG stocks versus the S&P 500 even higher.
Wednesday was much of the same, with most every sector again closing in the red, driven mostly by interpretations of the Federal Reserve’s release of the January Federal Open Market Committee meeting notes. In fact, twenty-five minutes after the release of those notes, the Dow was up 303 points . . . and then proceeded to fall 470 points to close the day down 167 points. To put that swing in context, so far in 2018, the Dow has experienced that kind of a range seven times but not once in 2017.
Thursday was a mixed bag. Most sectors were flat to slightly up as the S&P 500 closed up just +0.1%, while both the Russell 2000 and the Nasdaq Composite lost -0.1%. The energy sector was the strongest performer, gaining 1.3% while financials took a hit, falling 0.7%.
The recovery from the lows this year has been relatively narrow. As of Thursday’s close, the S&P 500 is still below its 50-day moving average, up 1.1% year-to-date with the median S&P 500 sector down -1.0%. Amazon, Microsoft and Netflix alone are responsible for nearly half of the year’s gain in the S&P 500. The Russell 2000 is down -0.4% year-to-date and also below its 50-day moving average. The Dow is up 78 points year-to-date, but without Boeing (BA), would be down 317 points as two-thirds of Dow stocks are in the red for the year.
Fixed Income and Inflation — the Coming Debt Headwind
The 1-year Treasury yield hit 2.0%, the highest since 2008 while the 5-year Treasury yield has risen to the highest rate since 2010, these are material moves!
What hasn’t been terribly material so far is the Fed’s tapering program. It isn’t exactly a fire sale with the assets of the Federal Reserve down all off 0.99% since September 27 when Quantitative Tightening began, which translates into an annualized pace of 2.4%.
As for inflationary pressures, U.S. Import prices increased 3.6% year-over-year versus expectations for 3.0%, mostly reflecting the continued weakness in the greenback. The Amex Dollar Index (DXY) has been below both its 50-day and 200-day moving averages for all of 2018. The increase in import prices excluding fuel was the largest since 2012 and also beat expectations. Import prices for autos, auto parts and capital goods have accelerated but consumer good ex-autos once again moved into negative territory.
Outside the U.S. we see little evidence that inflation is accelerating. Korea’s PPI fell further to 1.2% - no evidence of rising inflation there. In China the Producer Price Index fell to a 1-year low – yet another sign that we don’t have rising global inflation. On Friday the European Central Bank’s measure of Eurozone inflation for January came in at 1.3% overall and has been fairly steadily declining since reaching a peak of 1.9% last April. This morning we saw that Japan’s Consumer Price Index rose for the 13th consecutive month in January, rising 0.9% from year-ago levels. Excluding fresh food and energy, the increase was just 0.4% - again, not exactly a hair-on-fire pace.
The reality is that the U.S. economy is today the most leveraged it has been in modern history with a total debt load of around $47 trillion. On average, roughly 20% of this debt rolls over annually. Using a quick back-of-the-envelope estimate, the new blended average rate for the debt that is rolling over this year will likely be 0.5% higher. That translates to approximately $250 billion in higher debt service costs this year. Talk about a headwind to both growth and inflationary pressures. The more the economy picks up steam and pushes interest rates up, the greater the headwind with such a large debt load… something consumers are no doubt familiar with and are poised to experience yet again in the coming quarters.
The Twists and Turns of Cryptocurrencies
The wild west drama of the cryptocurrency world continued this week as the South Korean official who led the government’s regulatory clampdown on cryptocurrencies was found dead Sunday, presumably having suffered a fatal heart attack, but the police have opened an investigation into the cause of his death.
Tuesday, according to Yonhap News, the nation’s financial regulator said the government will support “normal transactions” of cryptocurrencies, three weeks after banning digital currency trades through anonymous bank accounts. Yonhap also reported that the South Korean government will “encourage” banks to work with the cryptocurrency exchanges. Go figure. Bitcoin has nearly doubled off its recent lows.
Tuesday the crisis-ridden nation of Venezuela launched an oil-backed cryptocurrency, the “petro,” in hopes that it will help circumvent financials sanctions imposed by the U.S. and help improve the nation’s failing economy. This was the first cryptocurrency officially launched by a government. President Nicolás Maduro hosted a televised launch in the presidential palace which had been dressed up with texts moving on screens and party-like music stating, “The game took off successfully.” The government plans to sell 82.4 million petros to the public. This will be an interesting one to watch.
Economy — Maintaining Context & Perspective is Key
Housing joined the ranks of U.S. economic indicators disappointing to the downside in January with the decline in existing home sales. Turnover fell 3.2%, the second consecutive decline, and is now at the lowest annual rate since last September. Sales were 4.8% below year-ago levels while the median sales price fell 2.4%, also the second consecutive decline and this marks the 6th decline in the past 7 months. U.S. mortgage applications for purchase are near a 52-week low.
Again, that’s the latest data, but as we like to say here at Tematica, context and perspective are key. Looking back over the past month, around 60% of the U.S. economic data releases have come in below expectations and this has prompted the Citigroup Economic Surprise Index (CESI) to test a 4-month low. Sorry to break it to you folks, but the prevailing narrative of an accelerating economy just isn’t supported by the hard data. No wonder that even the ever-optimistic Atlanta Fed has slashed its GDPNow forecast for the current quarter down to 3.2% from 5.4% on Feb. 1. We suspect further downward revisions are likely.
Looking up north, it wasn’t just the U.S. consumer who stepped back from buying with disappointing retail sales as Canadian retail sales missed badly, falling 0.8% versus expectations for a 0.1% decline. Over in the land of bronze, silver and gold dreams, South Korean exports declined 3.9% year-over-year.
Wednesday’s flash PMI’s were all pretty much a miss to the downside. Eurozone Manufacturing PMI for February declined more than was expected to 58.5 from 59.6 in January versus expectations for 59.2. Same goes for Services which dropped to 56.7 from 58 versus expectations for 57.7. France and Germany also saw both their manufacturing and services PMIs decline more than expected in February. The U.K. saw its unemployment rate rise unexpectedly to 4.4% from 4.3%
The Bottom Line
Economic acceleration and rising inflation aren’t showing up to the degree that was expected, and this was a market priced for perfection. The Federal Reserve is giving indications that it will not be providing the same kind of downside protection that asset prices have enjoyed since the crisis, pushing markets to reprice risk and question the priced-to-perfection stocks.
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