Part A - Risks and Opportunities

Finding 1 - A threshold issue

Understanding customers is now much more of a science than art. And it needs to be. Customers have become more sophisticated, more empowered and also

more distrustful of institutions. Predictably, gaining insights into spending patterns, buying preferences and emerging trends, has become a billion dollar industry.

The explicit focus on customer centricity (loosely defined as putting customers at the centre of decisions along the entire business value chain) has heightened demand for insights which relate to customers’ experiences. While some have suggested that customer centricity requires an almost complete rewiring of organisational practices, there is much that can be done to enhance existing interactions without launching into holistic change. Indeed many of these changes are low cost and occur during discrete moments in the customer lifecycle.

And that is good news.

By way of example, a company specialising in glass repair and replacement services is working hard to be the preferred supplier of services to female drivers. The company identified that many of its female customers were anxious about having a ‘stranger’ come into their homes. Their response? Once an appointment is scheduled, an introductory email is sent to the customer containing details of the technician, including a photo, to help give the customer peace of mind. It’s a simple, minimal cost strategy that helps reinforce to female customers that their needs are respected.

Indeed one of the key findings from the Customer Diversity research is that paying attention to fundamentals – like whether customers are treated respectfully and fairly - measurably improves customers’ experiences and significantly influences their buying decisions. Decoding 'respect' is straightforward – customers are talking about being treated with courtesy and consideration. 'Fairness' needs clarification.

In this context, customers are not using the word 'fairly' in the sense of receiving a fair price, but in the sense of being 'treated fairly as a person'. To put it another way, customers don’t want to be embarrassed, rejected or discriminated against.

This won’t be a revelation. In every interaction - from the mundane to the significant - we all expect to be treated respectfully and fairly by the organisations with which we engage. Respect and fairness are arguably the most basic behaviours underpinning good customer service and thus a hallmark of customer centric organisations.

And for the majority of us, our customer experiences are usually positive. Indeed, two-thirds of customers surveyed felt that, over the last 12 months, they were usually treated respectfully and fairly by organisations with which they interacted.

Getting agreement from the final third ought not to take a huge amount of effort, especially as it is only about 1 in 10 customers who actually disagreed (the rest were neutral). But there are two things that get in the way of remedying this threshold issue: focus and diversity.

Focus

Only 1 in 2 of those surveyed agreed that ensuring all customers are treated respectfully is a priority for organisations. This is a surprise given the high level of attention to customer centricity (customers are a top priority according to a 2016 survey of 1,400 CEOs around the world) and the simplicity of a call for respectful and fair behaviour.

Diversity

Customers are not homogenous, and averages hide quite variable experiences across different customer groups.

Insightfully, fewer than half of those surveyed (41%) agreed that organisations treat customers respectfully regardless of their personal characteristics. Moreover, only 46% agreed that organisations try to understand the unique experiences and needs of diverse customers, including minority groups.

Putting these two insights together: if organisations want to lift their (customer experience) game, it would require a greater emphasis on respect and fairness per se and particular attention to diverse customers. But before jumping to remedial action, the logical question is – do these perceptions accurately reflect the experiences of diverse customers?

Finding 2 - Different experiences (and not in a good way)

Although Marketing Officers have a long history of segmenting customers into groups that share similar characteristics, there is perhaps more to learn by bringing the HR lens of analysis into the frame.

By way of example, which customer groups feel they are treated respectfully, and which don’t? And what is driving that outcome?

To answer those questions, one of the principal aims of the Customer Diversity research was to compare and contrast the experiences and expectations of people based on specific demographic characteristics:

Gender: Male, female and intersex
Cultural background: Anglo-Celtic, European, Indigenous and Non-European
Faith: Those who do and don’t practice a Faith which is noticeable to others (e.g. via symbols or appearance)
Sexual orientation or gender identity: Heterosexual, lesbian, gay, bisexual and transgender
Disability: With or without a disability that affects the ability to purchase goods and services
Age: Different age brackets, e.g. 65+ years of age.

To segment customers into six groups is not to suggest that customers are one-dimensional, or indeed to assume that a particular characteristic (e.g. sexual orientation) is always salient to a particular member of that group (e.g. a gay customer). Rather, it is a way to look for patterns such as whether certain customer groups, or clusters of groups, have less favourable experiences than others.

So what were the results?

While expectations and experiences vary across different groups, as a rule of thumb, customer experiences are better for some groups and worse for others based on nothing more than an irrelevant personal characteristic.

More specifically, customers from ‘minority’ groups – such as customers with a non- Anglo Celtic background, who have a disability or who identify as Lesbian, gay or bisexual, were significantly more likely to say that, in the last 12-months, they were often treated less favourably than other customers.

The multiple identities of customers

The Customer Diversity research analyses the data based on specific demographic groups, such as gender and age. In reality, this segmentation is simplistic. Individuals are not one-dimensional and we each have multiple identities, with many parts making up who we are. In addition, in a customer context, categorising someone on the basis of one trait only (e.g. sexual orientation) may not necessarily be how customers see themselves and is at odds with organisational efforts to see the customers ‘as a whole’.

However, it is a lesson learnt from HR that certain employee groups have less favourable experiences than others due to nothing more than a single characteristic.

What do these statistics look like in practice? What is the tangible customer experience? The stories told during the research interviews and focus groups were both good and bad, with four common themes:

We don’t know what we don’t know Misinformation or a lack of information about customers, with stereotypes often filling those gaps.
Don’t fence me in. A feeling of being negatively judged by service providers, driven by implicit attitudes and assumptions, based on personal characteristics.
A road less travelled. Unmet accessibility needs, with diverse customers being negatively impacted by environments (physical and online) that do not consider their unique needs.
Not front of mind. Advertising or communications that are not developed with diversity in mind.

Examples:

'My partner and I are gay – he is Australian and I am Chinese. During an overseas holiday, we decided to visit a Louis Vuitton store. The staff completely ignored my partner but went above and beyond to service me!'

'I am profoundly deaf, so I lip read in order to understand what others are saying. I once told a frontline staff member that I am hearing impaired and they asked if it would help if they provided me with a Braille document.'

'When my husband and I are in a public space, like a retail store and he starts speaking in our own language, I tell him to revert back to English. I wear a headscarf and we are Muslim, so I worry that we might off someone or that they may make negative assumptions about us.’

'My family, who are Indigenous, went to a shopping centre the other day to purchase some goods and browse the shops. After a short while, they noticed that they were being followed by security personnel in and out of shops – they felt really agitated and judged by this.'

'I am a woman, gay and an Indigenous Australian. I look a ‘specifi way’ and I feel that I am often immediately judged on my ‘indigenous characteristics’ in the customer environment.'

'I have a physical disability as well as being visually and hearing impaired. As a result of this, I have very limited places I can go as a consumer. The IGA down the road from where I live know me by name and often order in goods that they don’t have on shelves or in stock. They really help me to maintain my independence and rely less on my family for assistance.'

But in the overall scheme of things, does it really make a difference to an organisation’s bottom line? If diverse customers are treated disrespectfully and unfairly, is there a hidden impact (beyond an obvious issue of poor customer service or non-compliance with discrimination laws), which accumulates over time? Just like the pattern we see for diverse employees who fail to break through the Glass, Rainbow and Bamboo ceiling far too regularly, is there a long term and magnified negative impact on the customer bottom line?

And what about the reverse? Is there an added benefit when attending to the needs of diverse customers?

More of that later, but the silver lining has already been foreshowed in some of the positive stories – and here is another:

The negative stories reveal a combination of overt stereotypes and unconscious biases, combined with a lack of awareness, which create subtle (and, in some cases, not so subtle) acts of exclusion. Not always, but enough to be noticeable to those affected.

Finding 3 - Misunderstood and underserviced

All companies make strategic decisions about the markets and customers they wish to serve, thinking about who will add most significantly to their bottom line.

But within these strategic parameters - how effectively are organisations adjusting their product set and modifying their services to reflect the needs and wants of different customers? Putting this another way, is there a risk that certain customer groups are being unintentionally ignored and/or misunderstood by organisations? According to the Customer Diversity research, the answer is – quite probably.

To set the scene, all survey respondents were asked about customer satisfaction, not through a diversity lens, but more in terms of being a customer per se.

More specifically, people were asked whether, as a customer, they often felt that, over the past 12 months, organisations had not provided the products and services they needed. About 1 in 4 (28%) said that they had been underserved. In effect, that they were a 'lost sale'.

1 in 4 is a significant market opportunity. It’s an even bigger opportunity when a diversity lens is applied and the responses are compared across demographic groups. Lost sales rise to about 1 in 3 for customers from Indigenous (39%) or Non-European backgrounds (30%) and people with a disability (35%). They edge closer to 1 in 2 customers who identify as lesbian, gay or bisexual (42%) and people who practice a noticeable Faith (42%).

Australians represented on television

'(Screen Australia) analysed all 199 dramas (fiction excluding animation) that aired between 2011 and 2015 inclusive, finding 18% of main characters in the period were from non-Anglo Celtic backgrounds, compared to 32% of the population. A notable exception to this trend is Indigenous representation, making a dramatic turnaround in screen presence.

Only 4% of main characters had an identified disability compared to an estimated 18% of Australians, whilst 5% of main characters were identified as ‘LGBQI’, yet this group is estimated to be up to 11% of the population.'

Men and women in film

Male characters received two times the amount of screen time as female characters in 2015 (28.5% compared to 16.0%)

In films with a male lead, male characters appeared on screen nearly three times more often than female characters (34.5% compared to 12.9%).

Male characters spoke twice as often as female characters (28.4% compared to 15.4%)

In films with male leads, male characters spoke three times more often than female characters (33.1% compared to 9.8%).

Films led by women grossed 15.8% more on average than films led by men.

Could it be that diverse groups are not front of mind for organisations because they are less vocal about their experiences? Or is it that organisations are not listening as hard as they could? The answer falls somewhere in between.

On the one hand, speaking up is not a common practice for customers when the issue relates specifically to their needs as a customer in terms of their sex, cultural heritage, age, faith, disability or sexual orientation. Despite these unmet needs, the vast majority (80% or more) of surveyed customers who have an Indigenous or Non-European background, a disability, identify as lesbian, gay or bisexual or who practice a noticeable Faith do not ‘often’ provide feedback, suggesting information gaps on the part of organisations.

Positively, when customers did speak up, the response was usually handled 'well' (69%).

So where does that leave organisations? With some level of confidence that they can meet customer needs if they are raised, but with significant doubts that they will hear what diverse customers need unless they take proactive measures to investigate.

Relying on the less than 1 in 5 who 'often' give feedback about needs relevant to their demographic characteristic and the voices of some of the relatively more vocal groups, represents a significant information gap.

A much more proactive and comprehensive feedback strategy is required. Why? Because there are two obvious consequences when organisations are left in the dark about the needs of diverse customers. First, as we have seen in this section, there are a high proportion of lost sales. Second, as we will see in the following section, poor experiences with existing products and services cause customers to cease a transaction, avoid an organisation and become a detractor.

Finding 4 - Abandon, avoid and detract

Purchasing power is in the hands of customers and when we don’t get what we want and need in terms of a product or service, it’s only natural that we won’t transact with an organisation. The Customer Diversity research adds additional detail to this dynamic, showing that if customers’ basic needs for respect and fairness are not met, it will also drive customers away. Of course, not every customer and not every time. It’s always a fine calibration about the level of disrespect or unfair treatment in the context of numerous factors, including price, options and the ability to walk away.

To set the scene, on average nearly 1 in 5 of those surveyed ceased the completion of a customer transaction in the past 12 months because they felt they were not being treated respectfully (21%) or fairly as a person (19%). This represents a strong alignment between wanting to cease a transaction (1 in 5) and actually doing it.

Looking through a diversity lens, these averages mask significant differences. When the results of Indigenous customers are compared to those who are from European, Non-European and Anglo-Celtic backgrounds, or those who identify as lesbian, gay or bisexual compared to those who do not, or those who do and don’t practice a noticeable Faith, or those with and without a disability – a pattern emerges. The proportion is significantly higher: 1 in 3 ceased a transaction due to being treated disrespectfully and unfairly.

More than just walking away from a sale, these customers were also significantly more likely to say that, as a customer over the last 12 months, they actively avoided engaging with a particular organisation because of their cultural background, sexual orientation, disability, or noticeable Faith. Indeed they were three times as likely as their counterparts to engage in avoidance behaviours.

But it didn’t just stop with the individual customer who had a poor experience – who then became an avoider. These disaffected customers became vocal advocates in their community. Perhaps with a spirit of community protection, they were significantly more likely to dissuade others from using a product or service because the organisation was not supportive of diversity (e.g. gender equality, marriage equality, people with a disability, older people or cultural diversity).

In fact, Indigenous customers and those from non-European backgrounds were twice as likely to dissuade others compared with customers from Anglo-Celtic backgrounds, as were people with a disability compared to those without a disability, and customers who identify as lesbian, gay or bisexual compared to those who do not.To put it bluntly, vocal detraction is multiplied for diverse groups.

These statistics were brought to life in the stories told during the interviews and focus groups – stories repeated about how others (e.g. friends) had experienced unfavourable treatment. For example, 'A friend of mine, who is a law graduate was refused service in a cake shop because of their ethnic appearance' and 'I know of a time that someone was refused entry to a club because they were wearing a headscarf.'

Looking at all of these behaviours together (stopping a sale, avoidance and detraction), clearly there is a long term, magnified impact when diverse customers are not treated well. And there is obviously a financial cost to these hidden risks – particularly given the significant shifts in who holds the purse strings and customer empowerment.

For example, Australian gay and lesbian households control an estimated annual disposal income of $10 billion. People with disability have a combined disposable annual income of around $54 million, a figure that is only set to increase with an ageing population. And when it comes to international customers - spending by Chinese tourists (i.e. 'Non-European customers') was forecast to reach $4.1 billion in Australia in 2016.

But what if organisations get it right? What is the impact on the buying behaviours of these diverse customers when organisations show demonstrable commitment to diversity? And is there extra selling power in promoting an organisation's commitment to diversity across other customer groups too?

Finding 5 - Extra selling power

As foreshadowed in Finding 2, diverse customers who have had a positive customer experience are likely to notice, appreciate and retell that story to others. During interviews and focus groups, customers told a broad range of stories that affected themselves directly or those they cared about. Some could be easily traced back to a dominant demographic profile, others were blended. By way of example, customers said:

1. Disability

'My wife and I get a ‘Meals on Wheels’ delivery weekly. The delivery comes on Monday but there was an upcoming public holiday, so I received a call from them asking me if they could do a double delivery and if we could accommodate this. It was really fantastic that they considered our needs in this way and were so flexible.'

2. Gender identity

'I love what Google has done at their offices with the toilet facilities signage. The typical male and female signs on the toilet doors have been replaced by pictures of a pregnant lady, a mermaid and batman amongst others.'

3. Cultural heritage/disability

'My brother is an Indigenous Australian with a physical disability. I don’t feel that his needs are catered to very much in the customer space and he often feels isolated. Recently however, he joined the Cerebral Palsy League where he plays in an all Indigenous Australian team, which has been backed and supported by big names from the NRL. It has made such a difference to his life.'

4. Sexual orientation

'My partner and I made the decision to get a loan together, we went to a bank who did not question our sexuality. The whole process was made easy and at no time did I feel like I was treated differently than what I might have if I was heterosexual. It was such a great experience; I recommend [X] to my friends.'

These all represent relatively small acts of inclusion, and their positive impact is only to be expected. But there’s something more in the selling power of diversity.

Supporters of 'ethical consumerism' argue that customer decisions are being increasingly influenced by factors beyond the typical formula of need/want, convenience and price. In particular, customers are using their purchasing power to endorse organisations which fit with personal moral codes and broader societal goals, such as environmental sustainability.

Could an organisation’s support for diversity and inclusion tap into this same customer vein? Beyond positive advocacy within a particular customer demographic group, could some equality themes (e.g. cultural diversity) generate broader support, that is, from customers who do not fit that specific demographic profile? Conversely, what is the risk of supporting diversity? What percentage of customers will be turned off?

The Customer Diversity Survey asked customers whether their buying choices, in the last 12 months, were positively or negatively influenced by an organisation’s reputation as supportive of five diversity/ equality themes, namely gender equality, marriage equality, people with a disability, older people and cultural diversity.

Happily for organisations, the risk is low: only a minority of customers (13%) were negatively influenced by an organisation's support for equality. Even more positively, 58% disagreed (and the rest were neutral). This should offer some comfort to organisations concerned that support for an equality theme will disenfranchise some of their existing customers.

On the other hand, the opportunity is large given customer behaviours and the swell of support beyond the immediate target group.

On average 1 in 4 were positively influenced over the past 12 months by an organisation’s reputation as being supportive of gender equality (including women), however that proportion was significantly higher – nearly 1 in 2 – for customers practicing a noticeable Faith (49%) and customers identifying as lesbian, gay or bisexual (45%).

On average 1 in 4 were positively influenced over the past 12 months by an organisation’s reputation as being supportive of marriage equality, however that proportion was significantly higher – nearly 1 in 2 – for customers practicing a noticeable Faith (45%), identifying as lesbian, gay or bisexual (44%) and aged 18-25 (41%).

On average 1 in 3 were positively influenced over the past 12 months by an organisation’s reputation as being supportive of people with a disability, however that proportion was significantly higher - nearly 1 in 2 – for customers identifying as lesbian, gay or bisexual (46%), practicing a noticeable Faith (44%), with a disability (43%) and aged 18-25 (39%).

On average 1 in 3 were positively influenced over the past 12 months by an organisation’s reputation as being supportive of older people (including customers aged 66-75 years old, and over 75 years old), however that proportion was significantly higher - nearly 1 in 2 – for customers identifying as lesbian, gay or bisexual (49%), practicing a noticeable Faith (46%) and with a disability (41%).

On average 1 in 4 were positively influenced over the past 12 months by an organisation’s reputation as being supportive of cultural diversity (although for Non-Europeans it edged up towards 1 in 3 or 31%), however that proportion was significantly higher - nearly 1 in 2 – for customers identifying as lesbian, gay or bisexual (46%), practicing a noticeable Faith (45%) and aged 18-25 (43%).

Taking these five themes as a whole – a pattern is clear. Equality themes resonate with groups who are not directly affected. In particular, across all five themes, customers who identify as lesbian, gay or bisexual, as well as those practicing a noticeable Faith, were much more supportive of an equality theme, compared with other customers. Next were young people aged 18-25, who supported three of the five themes (marriage equality, people with a disability and cultural diversity). Finally, people with a disability had heightened support for two of the themes (people with a disability and older people).

Authentically amplifying these five equality themes promises to help unlock more of the purchasing power of these diversity communities. How do we know that?

As noted early, when diverse customers had a poor experience they were twice as likely to pass on that information to others in their community. That pattern holds true in reverse. Customers who identify as lesbian, gay or bisexual and people who practice a noticeable Faith were about twice as likely to say that they had already recommended an organisation to someone else in the past 12 months, based on the organisation’s positive reputation as supportive of the five equality themes.

Undoubtedly the Customer Diversity research has shed light on both the risks and opportunities associated with customer diversity. The final question is:

What will organisations do to become a more diverse customer centric organisation?