The simple truth about customer experience

by Nigel Hollis

Here is the simple truth about customer experience: it’s complicated. And we all know how much people hate complexity. That is why a measure like NPS has become so popular. One number, that’s the answer…except when it is not.

In our new report Mastering Momentum we identify customer experience as an important precursor to growth. Unless existing customers are satisfied with their experience, a brand will find it difficult to grow, since new customers simply replace disaffected ones lost to competitors. Further, customers with positive experiences will be more likely to recommend your brand. In an age when empowered customers know what they want, and when and how they want it, a focus on experience has never been more critical for business success.

What do Blockbuster, Kmart, Toys ‘R’ Us have in common? They were all big brands that filed for bankruptcy. Kmart in 2002, Blockbuster in 2010 and Toys ‘R’ Us in 2017. All three were unable to fulfill customer expectations in an evolving competitive landscape. When it comes to understanding what drives business growth and where to set the right priorities for providing a great customer experience, companies must measure how their brand fares compared to existing (and upcoming!) competitors.  

There is a lot of academic evidence to support this case. Take, for instance the MIT Sloan Management Review article titled, “The High Price of Customer Satisfaction”, authored by Timothy Keiningham, Sunil Gupta, Lerzan Aksoy and Alexander Buoye.  One of the key conclusions is that a ‘good’ customer satisfaction rating will only mean something if the same person does not rate another company as better. The authors state that translating absolute scores into relative ones improves the explanation of share of wallet variation from one percent to twenty.

Given the critical nature of customer experience to future growth it is essential to actively manage experiences and monitor progress with the right metrics, and what those are will depend on what the data is to be used for. Simple, straightforward indicators of customer experience, like NPS are usually best placed in the context of transactional Voice of the customer programmes. Here the objective is to capture feedback immediately after an experience and push this (via a technology platform) and in more or less real-time to the person who is accountable for the experience for action. As the focus is on engaging a whole organisation around customer experience, simplicity is key.

It is also essential, however, to do an annual ‘health check’ that informs your customer strategy. What are your competitors doing and are you still investing in the right areas? How is the overall relationship to your brand and how does this differ between customer segments? Which competitive offers are threatening your customer base? How much of your business is at risk and where would it go? And ultimately the link to your brand strategy is a crucial one: are you truly delivering to what you promise and stand for as a brand?

An ideal architecture for CX captures both angles: the real-time feedback management for activating customer-centricity as well as a strategic part to guide how to differentiate from competitors. With that in place, the bankruptcy of Toys ‘R’ Us might have been avoided. So why do companies often ignore the competitive context they are in when it comes to CX?