Report

Customer Experience at a Crossroads: What Drives CX Success?

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Chapter 2

Customer Experience Strategy

Defining “Winning” at Customer Experience

For the balance of this report, CX success factors will be evaluated by making comparisons between three segments of CX initiatives, with special emphasis on differences between Developing and Winning segments.

Customer Experience

Figure 2 – CXM Success Segments

Why is “Winning” defined as quantified benefits or competitive edge? Because that’s what most executives want, say CX industry experts. According to Lynn Hunsaker of ClearAction Continuum, when asked for advice on how to convince upper management to make CX investments:

“Money talks. And logic. Upper management may need to be reminded about the source of revenue: investors leave when customers leave, not the other way around. Earnings per share increases when profitable customers organically expand share of budget with the company. Show the % of customers retained, their revenue contribution, their purchase expansion beyond the first product they bought, their influence on other customers and prospects.”

Given the foregoing, it’s no surprise that 69% disagreed that the “primary goal of CXM is to improve customer service” and 65% agreed that “CX initiatives must include products and pricing.” Still, roughly one-third of respondents see CXM in a more limited perspective than experts advocate.

Qualifying for the Winning segment is not exceptionally difficult, because respondents need only agree that “CXM outcomes can be quantified,” not that benefits exceed investments in a formal payback analysis.

So, are the other CX initiatives “losing”? No! CX leaders of Starting and Developing initiatives cite numerous benefits, including increased customer satisfaction, brand building, revenue growth, cost reduction and more (see Figure 3). Furthermore, a strong majority of respondents in the Developing segment report at least a moderate increase in customer satisfaction in the past year.

Unfortunately, beliefs and feelings are not enough to satisfy executives with budget authority. While there is often conceptual agreement that improving CX is the right thing to do, “show me the money” is more likely to be the attitude of senior executives, says Beyond Philosophy’s Colin Shaw. CX leaders must show how CXM investments link to business value, a topic that will be explored later in this report.

Customer Experience

Figure 3 – Major CXM Benefits

Where to Focus Resources

Let’s turn to the critical topic of CX strategy. First of all, a “strategy” is a high-level plan of action designed to achieve a major goal. In the case of a “CX strategy,” virtually all industry experts, experienced CX leaders, and CX maturity researchers recommend that a CX strategy is developed, documented, shared, and agreed upon by the organization.

In the report “Customer Experience Strategy Best Practices,” Forrester says: “In fact, one thing that sets effective customer experience efforts apart from ineffective efforts is a defined conception of the intended experience for customers and a plan for getting there.”

But what other studies have not addressed is whether the type of CX strategy has any impact. Three options were explored in this study.

Fix, Connect, or Innovate?

Does it impact the odds of “winning” if a CX initiative is mainly focused on one of these options?

  • Fixing Touchpoints: “fixing issues at specific customer touchpoints (buying, usage, service, etc.)”
  • Connecting Journeys: “improving the end-to-end journey to help achieve the customer’s objectives”
  • Unique Experiences: “delivering a unique customer experience to differentiate in the market”

Yes, success rates (percentage of segment in Winning stage) did show differences across these strategies, as shown below, with the biggest jump from Connecting Journeys to Unique Experiences.

Figure 4 – Success Rate by Primary CX Strategy:

These strategies can, of course, be pursued at the same time. However, CX initiatives tend to start by finding and fixing obvious customer pain points within one functional area. Customer service is the most common starting point because it is the catcher of customer complaints. As efforts evolve and competencies develop, emphasis shifts to friction between major touchpoints. With the help of journey mapping, some complaints to customer service can be diagnosed as having a root cause in marketing, sales, or product development.

For example, technology firm Verint had an issue with implementation services not being completed on time and on budget, according to VP of Customer Experience Nancy Porte. A journey map helped to diagnose the root cause much earlier in the journey, with preliminary sales quotes that were overly optimistic. Getting services professionals involved earlier resulted in better quotes and improved success. Indeed, CustomerThink found many examples of cross-organization process improvement in interviews with CX leaders.

Top brands don’t always optimize touchpoints or processes. Trader Joe’s, IKEA, and Southwest Airlines deliver experiences that uniquely position their brands, sometimes flouting conventional wisdom. For instance: Southwest doesn’t allow booking on third-party websites like Expedia and doesn’t give seat assignments.

CEO Gary Kelly defended open seating in a 2006 blog post:

“Open seating has allowed us to build a highly efficient operation by keeping the time our aircraft are sitting at our gate to a minimum. Aircraft on the ground don’t make money! But it’s no secret that all airlines – even Southwest – are facing extensive cost pressures due to the rising price of fuel and we have to find ways to generate additional revenue.”

Booking and boarding touchpoints, while not optimal for customers, are intentionally designed into a holistic experience to enables the airline to save money while offering affordable fares where “bags fly free.” Friendly, caring employees just adds to what some call a “branded experience” that helps Southwest stand out.

Solution, Interactions, or Price?

This study also analyzed success rates if the top priority was improving one of three major loyalty drivers:

  • Solution: how customers get value out of purchased products or services
  • Interactions: how customers engage with our people and systems
  • Price: how our customers perceive our pricing compared to alternatives

As you can see, improving interactions was the top priority for 59% of respondents, with 36% selecting improving solution. Only a handful of initiatives were focused on price. The success rates were nearly the same, close to the average of 25%, so focusing on solutions or interactions offers a similar odds of Winning.

Figure 5 – Success Rate by Focus on Loyalty Drivers:

CX initiatives are skewed toward improving interactions, despite the fact that solution and price account for the majority of weight as loyalty drivers (Figure 6). Even the Winning segment, where interactions received the largest average weight of 44%, the much larger balance (66%) is split between solution and price.

Customer Experience

Figure 6 – Relative Weights of Loyalty Drivers

This raises a question about whether CX leaders are focusing too much attention on interactions. Perhaps they have concluded that improving interactions is a better opportunity for marginal gains. Or, CX leaders may simply have more authority to drive change with interactions because solutions and pricing already have strong owners. In any case, CX leaders should make decisions based on impact, not convenience.

Buying, Usage, or Service?

Some industry experts have suggested that CXM is mainly about service improvement. A CustomerThink.com content analysis did find that improving service was a dominant theme written about by CX consultants and vendors. And, we’ve already concluded that “improving interactions” is the primary strategy of six out of ten CX initiatives. Of course, interactions could occur throughout the customer journey.

So, is it fair to say that CXM is just another term for service improvement?

In a word, no. This study asked respondents to rate the extent of focus across a customer journey. Figure 7 shows the percentage selecting “strong focus” by stage of a generic customer journey. While it’s clear that service and support is an emphasis for about 70% of CX initiatives, other stages get significant attention, too.

What’s notable is that Winning CX initiatives have a more consistent focus across the journey, at around 40% up through purchase, and 70% or so with usage and support stages. Less successful CX initiatives have a much bigger drop-off in the pre-purchase stages.

Customer Experience

Figure 7 – CX Focus by Stage of Customer Journey

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