In what’s been described as a ‘phydigtal world’, customer experience (CX) has fast become the competitive battleground on which business is won and lost.
Like it or not, we all depend on tech in everyday life, making our lives a blend of physical and digital experiences. For most of us, we are continually making choices, consciously and unconsciously, on which digital experiences we want in our lives. People are quick to discriminate those which add most value to their current lifestyle and beliefs.
Recent reports suggest organisations with leading customer experiences are now outperforming their competitors in almost every service sector:
Organisations that lead in CX outperformed laggards on the S&P 500 index by nearly 80%. (Watermark Consulting, 2018)
Experience-driven businesses grew revenue 1.4 times faster and increased customer lifetime value 1.6x more than other companies in the past year. (Forrester, 2018)
Customer-obsessed businesses expect to be 7x more relevant to customers, 5x more likely a top provider of products and 4x more profitable. (Forrester, 2016)
With outcomes like this, it’s of little surprise customer experience strategies are attracting a lot of attention from investors and awakening business leaders to the strategic significance and value of CX in business.
81% of companies expect to compete mostly or completely on the basis of CX in 2019. (Gartner, 2017)
However, numerous organisations with relatively low customer experience maturity are still failing to make CX a priority, and/or take action in making CX a pivotal part of their value proposition.
Is CX a wise investment strategy?
It sounds obvious, but before we can truly understand the value of something we must first have a clear and shared understanding what it is and what it offers. However, as a broad term, CX means different things to different people.
What CX is not
A common opinion is that customer experience is basically another buzzword for customer service. Others may describe it as how a customer feels whilst having direct contact with a business such visiting a website, shop or having a conversation with staff.
All of the above contribute to an experience, but they are only one piece of a bigger puzzle. CX has far bigger reach and impact than individual touchpoints in isolation.
A problem with organisations thinking in this way is those that don’t deal with customers directly dismiss themselves as adding little value, believing it’s someone else’s responsibility to deal with. Those that do may measure customer feedback in silos and make improvements, which have a detrimental impact to CX in other areas of the organisation.
What CX is
Essentially, you could say a customer experience is how your customer feels and remembers about your brand, its values, goods and services over time.
These feelings are built from all experiences, across multiple interactions and service touch points. Their entire customer journey, if you like. It’s important to note that both customer-facing services and back-end services all have an effect on the overall customer experience.
CX expectations are changing
As our dependency on technology grows, consumers expect and want both physical and digital experiences to be consistent and integrated (hence, ‘phydigital’), yet customer interactions are becoming ever more autonomous and automated.
Needless to say, differentiating and competing on more traditional, siloed service experiences alone no longer cuts it with today’s customer.
87% of organizations agree traditional experiences no longer satisfy customers.” (Accenture, 2018)
As a minimum, consumers now expect greater speed and convenience, whichever service or channel they use. Ideally, they hope to be delighted, to have their expectations exceeded by smart, relevant, immediate and seamless experiences across all touchpoints.
Ethical consumerism is also growing in strength and popularity. Increasingly, consumers want to feel and show that their purchases are driving positive change and represent a moral voice beyond functional purpose.
28% of Britons would tell friends and family to stop using a brand that went against their social values, while 27% would sign a petition. (Canvas8, 2020)
19% of 18- to 34-year-olds would call out such a company on social media, compared to just 7% of over-55s. (Canvas8, 2020)
Values-led consumers want to experience social alignment and elegance with authentic brands who echo and actively support their individual values and beliefs. However, authenticity must be earned through action, not marketing.
Many want to see positive impact from strong policies, such as ethical manufacturing practices, carbon neuturality, fair trade, sustainability, campaigning and education or tech for good.
27% of people say that misleading commitments to social/environmental causes would harm their perception of a brand. (GlobalWebIndex, 2019)
Negative experiences are costly
Overlooking customer values or downplaying bad experiences could be more costly than addressing them. With the prevalence and influence of social networks and ratings sites, bad customer experiences are quickly shared, having significant and long-lasting negative brand impact.
Bad experiences spread quickly. 30% of consumers tell the company. 50% tell their friends. 15% provide feedback on a ratings site & 14% tweet about it.(What happens after a good or bad experience, 2017)
41% of customers who had a very bad experience spent less with the company. 19% stopped spending altogether. (Temkin)
Psychological studies have also shown that bad experiences have greater impact than positive experiences. They can be more dominant, remembered for longer, in more detail, and can create negativity bias, meaning any future perceptions are tarred.
Bad impressions and bad stereotypes are quicker to form and more resistant to disconfirmation than good ones. (Roy F. Baumeister)
Can a better CX pay dividends?
In short, yes – if done correctly. Research figures have consistently shown a correlation between positive customer experiences and greater commercial growth and impact.
Good CX improves customer loyalty and retention
Today customer loyalty is hard to win and easily lost. Yet, improving customer experiences helps to build trust, future engagement and ward off competition.
.82 correlation between good CX & customers who are very likely to repurchase (See figure 1). (ROI or customer experience 2018)
Compared to detractors, promoters are 5.6x more likely to forgive a company after a mistake. (Economics of NPS, 2017)
Good CX promotes positive word of mouth and brand advocacy
Likelihood of customer recommendation increases as CX ratings rise. This becomes even more compelling when you consider the influential power of social proof when making decisions.
79% of consumers who’ve had a very good CX are very likely to recommend a company. 9% of consumers who’ve had a very poor CX will recommend a company. (ROI of Customer Experience, 2018)
Consumers that completely or somewhat trust brand are based on… Recommendations from people I know 83%, Consumer opinions posted online 66%, Editorial content, such as newspaper articles 66%. (Nielsen 2015)
Good CX increases sales
Consumers are more likely to remember, revisit and have repeat business with organisations that offer better experiences. The opposite is true for those with a bad CX.
Compared to detractors, promoters are 7.2x more likely to try a new offering. (Economics of NPS, 2017)
When consumers have a very good CX, they are 3.5x more likely to make additional purchases than if they have a very poor CX.(State of CX management, 2017)
After a bad experience, 22% cut their spending with the company and 19% stopped their relationships with the company completely. (Temkin, 2017)
Good CX drives revenue growth
Businesses providing consistently superior end-to-end customer experiences help drive demand, customer lifetime value and loyalty.
86% of consumers will pay more for a better customer experience. (Oracle, 2011)
73% of companies with above average CX maturity have better financial performance than their competitors, compared with 44% of less mature companies. (State of CX Management, 2017)
The ingredients for a great CX
Research suggests (Forrester predictions 2020) organisations with higher CX maturity have invested in, and work to establish, the following:
- A clear and evidence-based view of their target audience and what their needs are
- A common understanding of what a good CX entails today
- Leaders who prioritise CX investments over other business initiatives
- Strong appreciation of the positive impact CX strategies provide
- Willingness to recognise, accept and improve current levels of CX
- Ability to translate an experience into business growth and profit
- Proactively pivot traditional business cultures to be more customer-centric
- Invest in talent and technology needed to effectively champion, enhance and manage CX
- Have CX performance measurements embedded across the organisation
- Regularly action and incentivise change based on tangible CX value
If you’re looking to establish a great customer experience, these points provide a solid framework to work towards.
Organisations who place customer experience at the heart of their value proposition and culture benefit from greater business growth, increased revenue and build stronger customer loyalty and advocacy. However, developing CX maturity requires action, strong leadership, ongoing commitment and adequate investment strategy.
Those that secure this not only have the mechanisms and culture to understand and empathise with their customers, they also have the ability and willingness to take action and innovate based on customers’ changing needs.
The road to CX maturity may not be quick, or without its challenges, but evidence suggests that if done correctly the investment offers significant opportunity and financial return across all areas of business. In our next article, you’ll learn about great customer experience examples from leading brands – and how focusing on customer needs has cemented them as true trailblazers of CX.