Report

Customer Experience at a Crossroads: What Drives CX Success?

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Chapter 3

Current State of CXM

CXM is Mostly About Process Improvement

As discussed earlier, industry experts position CXM as working to improve the holistic, end-to-end customer journey that includes the solution (products, services), interactions, and pricing. But are CXM initiatives really focused on solutions or pricing? Based on interviews and survey responses, not so much.

To illustrate, CustomerThink asked for examples of “improving customer experiences” in the online survey. These representative responses suggest that CX professionals are mainly concerned with improving interactions and processes.

  • After a deep review and rebuilt of our Help Center, we achieved a decrease of 40% in the number of contacts by ticket.
  • Determining which online chat services work better than others and defining improvements to increase effectiveness and NPS.
  • Digitized paper-based processes and use design thinking to build online experiences from the user’s perspective
  • Duties and taxes can now be paid online in most European countries, this was not possible before (had to call center for this or do transfer)
  • For our major clients, we rearranged the account management structure so that the clients who provide the best revenue get the best account management support.
  • Generated scalable, consistent, customer facing product implementation process for successful on-boarding, product up-sell, and professional service engagements.
  • Greater awareness for frontline staff and their managers about the importance of engaging with customers and resolving their issues over and above score chasing.
  • Improved digital experiences via web and Apps

When asked to name companies that delivered “great CX,” two standout brands – Amazon and Apple – combined for 30% of mentions by respondents. Amazon is a quintessential service brand and Apple is an iconic product brand.

With the exception of Google, however, nearly all of the other major brands would be associated more closely with excellent service: Chick-Fil-A, Disney, Nordstrom, Ritz Carlton, Singapore Airlines, Southwest Airlines, USAA, and Zappos. None of this is to imply that these companies don’t provide competitive “products” but rather their brands are better aligned with “service” as a differentiator.

Emotion: The Missed Opportunity

The inescapable conclusion is that CXM as commonly practiced is largely focused on improving processes – within and between stages of a journey – to improve ease or efficiency. Consultant Amanda Forshew of Customer Alignment sees this limiting potential CXM returns:

“It’s well publicised that customers want faster, smoother, repeatable experiences; but customers are becoming increasingly unpredictable, even irrational in their pursuit of WOW!, which for organisations means responding purely with functional improvements which may not reap the intended dividends anticipated.”

Indeed, while it’s clear that process improvements are often necessary, Winning CX initiatives also bring emotion into the mix. When asked to select very important attributes of experiences that drive customer loyalty, functional attributes dominated with 83% of all respondents selecting “easy.” However, Winning CX initiatives prioritized “emotional” and “human” attributes much more highly.

Customer Experience

Figure 8 – CX Attributes Impact on Loyalty

Dave Fish of CuriousityCX observes that getting the basics right is a necessary first step:

“If you can’t manage to deliver things on time or get quality right or if you are a pain to work with, no amount of “extra” is going to help. Most consumers don’t care about the emotional/human stuff until such time as you get the table stakes right.”

Working on the basics is necessary to keep up, and that includes fixing customer pain points and streamlining processes. But Winners also design experiences to evoke an emotional response.

Rick Parrish, a Principal Analyst at Forrester focused on CX, found in a 2018 consumer study that emotion had a bigger impact than effectiveness or ease. “Elite brands provided about 22 emotionally positive experiences for each negative one; the bottom 5% of brands provided only two emotionally positive experiences for each negative one.”

A case in point is TurboTax, says Parrish, which found striving to minimize clicks actually hurt consumer experiences and hence loyalty. A more loyalty-building approach features TurboTax adding an extra step to ask “How are you feeling about doing your taxes?” Subsequent dialogs are customized based on whether the answer is “good,” “not so good,” or “don’t ask.”

After filing taxes with TurboTax, customers are left on a high note by receiving a congratulatory message and assurance they are finished with the process. According to Parrish, “traditional designers would balk at that, since it adds pages, clicks, and wait times, but it improves the experience.”

This example illustrates that emotion can be designed into software. But this study, like several others previously conducted by CustomerThink, finds 80% believe human-based interactions are better at creating memorable experiences.

Survey takers supplied these examples of how they attempted to deliver “memorable experiences”:

  • We recognise their birthday by a gift data and SMS
  • No-hassle refunds/replacements.
  • Focus of the majority of our customers is quick order placement and turnaround and supported by solid and pertinent communication at all relevant stages of the order cycle
  • Development of standards, processes, mystery shopping, training relating to the handover of the product to the customer
  • We make a lot of exceptions for customers which makes them feel “special” in the moment but makes me think that we need to be fine-tuning products, expectations and how we communicate.
  • We focus on excellent tech and sales support and quick response times.
  • Highly customize product recommendations and quick follow-ups
  • We send cards to customers who go through difficult implementations, we travel onsite for training, and we send care packages annually to customers who have been with us for a long time.
  • First contact resolution via Contact Centre
  • High enthusiasm peak moments during the interactions

Common positive emotions include: appreciated, confident, grateful, happy respectful, and valued, according to Forrester’s research. Brands should design for emotions they want to generate, and not assume that being “easy” is the only thing that matters, nor that every touchpoint requires a “wow.”

Using Customer Metrics to Monitor Progress

If CX Strategy is a plan, then customer satisfaction and loyalty metrics (“customer metrics”) are necessary to monitor progress against that plan. Think of them as “relationship health indicators.” Increases in metrics should ideally indicate that customer perceptions are improving and result in business outcomes like improved retention rates, purchase frequency, size of the shopping cart, etc.

Customer satisfaction (CSAT) has been used for decades, of course. Academic research finds it works well as a general-purpose loyalty metric. Enterprise Rent-A-Car is well known as a customer-centric brand that strives to increase a top box score on a simple question about whether customers are “completely satisfied with their last rental experience.”

In 2003, loyalty consultant Fred Reichheld proposed a simple method to measure loyalty, called the Net Promoter® Score. (Note: Net Promoter is a registered trademark of Satmetrix, Bain and Reichheld). Based on responses to a “would you recommend” question on a 0 to 10 scale, the percentage of detractors (0 to 6) are subtracted from promoters (9 or 10) to get a Net Promoter Score (NPS). Prominent brands like Amex, GE and Intuit have embraced this method with the belief that increasing scores will drive revenue growth, although that has been disputed by some studies.

More recently, Customer Effort Score (CES) has gained popularity as a metric aimed at reducing effort especially in customer service or other routine interactions. However, CES hasn’t been established as the best general- purpose metric for all situations.17 The main concern is that while “easy” is a widely desirable attribute, it is not the sole driver of customer loyalty.

Other metrics assessed in this study include likelihood to recommend (which of course underpins NPS), likelihood to buy again, and custom metrics created using a combination of factors.

The big picture is that NPS is most commonly used overall, by 83% of CX initiatives. CSAT isn’t far behind at 69%. On average, each respondent reported their organization used three different metrics, while only 19% of all respondents reported using just one metric – NPS getting the lion’s share.

Current Usage of Metrics

Figure 9 – Usage of Customer Metrics

But as you can see, Winning CX initiatives tend to use NPS and CSAT somewhat less, and custom metrics substantially more, than those in a Developing stage. CustomerThink research has found this reflects the experience of savvy CX leaders that there is not “one” metric that is best for all situations.

Loyalty metrics expert Bob Hayes of Business Over Broadway points out that different types of loyalty require different metrics. For instance, in a study of the telecom industry he concluded that retention, new customer growth, and average revenue per customer required different questions. CX leaders shouldn’t pin their hopes on any one metric.

All Business is Relative

One hypothesis for this research is that Winners would be more likely to track loyalty metrics vs. competitors. About half of all respondents reported tracking at least one of their loyalty metrics vs. competitors. However, the results were inconclusive that this is a driver of CX success.

Still, discussions with CX experts and practitioners suggest that competitive position should not be ignored if companies intend to “compete based on customer experience.” It’s certainly possible to make CX improvements, see scores rise, and not generate the expected business results if competitors are doing much the same thing. In fact, recent Forrester research suggests that CX industry improvements are stagnating for that reason, as about half of companies move in “lockstep” – keeping pace with competitors.

Industry experts generally agree that competitive benchmarking can be helpful. Larger firms tend to rely on syndicated benchmark research, says Bob Hayes. Smaller firms with a limited budget can get insight by asking ranking questions about competitors in feedback surveys, which has been found to be a good predictor of up/cross-selling.

Tim Keiningham, loyalty researcher and coauthor of The Wallet Allocation Rule, says that if growing share of wallet is important, then it’s important to assess whether “customers perceive your brand as better, the same, or worse than competing brands they also use.” His research has found that by knowing your brand’s rank and the number of competing brands that a customer also uses, managers can now accurately predict share of wallet using a simple formula.

Gautam Mahajan, an expert in Customer Value Management (CVM), argues that the “true test of loyalty is repurchase which is based on value,” which must be considered relative to competitive alternatives. Even if a customer has given high or increasing customer satisfaction ratings – positive signs in CXM thinking – a better value offered by a competitor may cause a defection. A calculation of Customer Value Added (CVA) can help determine competitive position (CVA = Perceived worth of your offer / Perceived worth of competitive offer.)

While this study only considered customer metrics based on survey responses, it’s important to note that other alternatives are emerging thanks to advanced analytics. Bill Price of Driva Solutions advocates “mashing up” of conventional survey-based data and operational data to identify real loyalty drivers and take proactive action. However, interviews in this research found no evidence of widespread adoption of what some called “inferred” loyalty metrics based on operational or behavioral data.

One caveat. Using loyalty metrics for any purpose, including competitive comparisons, assumes that scores are not “gamed” by employees who are overly incentivized (via bonuses, rewards, or penalties) to beg or cheat to increase scores. This is an unintended consequence of some well-meaning business leaders who want to encourage employees to deliver better experiences, but make higher scores the goal instead.

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