CX can bring massive benefits but BEWARE – don’t follow the herd
Everyone knows something about Customer Experience (CX) – at least the most well-publicised concepts. Whilst many companies have started the process of changing to a more customer centric culture there are still a significant number who are interested but have either not yet started or relatively early in the process.
There are still a surprising number of myths that surround this still relatively embryonic practice. Some early adopters have delivered great results, but most have delivered indifferent or below target returns. People have now started to question whether CX can still deliver or is it an over-hyped fad which has some value but not as the game changer originally promised.
This article examines and in part challenges some of the most widely held beliefs and offers a healthy dose of reality designed to help those looking to create value from a customer, P&L and employee engagement level.
Belief 1 – Customer Experience offers companies massive business impact
This is true, but only for those who have demonstrated exemplary execution. The majority of companies gain some value but fall short of achieving full potential.
The surveys have painted a stronger picture than reality has shown. For example, Forrester reported a survey where based on the S&P 500 which showed top CX performers outperformed the average for the index by a factor of 3. This observation was true when applied to a specific timescale but examination of other timescales showed lower returns although still impressive. Every 1%-point change in share price that CX delivered contributed to between 250 million USD and 750 million USD depending on where the company sat within the index, so the benefit in cash terms is considerable.
Gartner reported that by 2018 89% of companies expect to be competing mainly on customer experience.
This contributed to a belief that customer experience offered the equivalent of a magic bullet but for many these bullish observations has been a lot slower than many predicted. Proponents of a new thinking will often boldly “big the potential benefits” without giving enough coverage to the sheer effort required to achieve it. Within the last months companies who were at one time extolling the incredible opportunity offered by the customer age now claimed it has now effectively stalled.
Neither the “Bulls” or the “Bears” are painting an accurate picture. Great CX companies are delivering top of market results but they have worked extremely hard to achieve it – to a point of obsession.
So what is gap? Part of the problem is a lack of completeness in understanding how a customer centric company should operate. This might sound strange because the basic concepts appear very logical – almost obvious. There are significant layers of understanding missing and the gap is not in the main being recognised. The second point is changing the DNA of company from a product/service centric model is very difficult. Companies are split by functional specialisation. How does a customer centric company operate when the structure is already defined around building a product or service? Most companies focus on the interfaces which adds value but does not deliver anything like full potential.
That said, those have achieved it do end up dominating their markets.
Belief 2 – Customer Experience is well understood as a practice
This is a myth. It most certainly isn’t!
The practice has emerged in a relatively haphazard fashion based mainly on a definition that focuses on all the interactions a company has with its customers. In the main, companies look at the interactions at each of the touchpoints, measure associated emotion and then identify ideas to make the emotions (and therefore the experiences) better. Yes, this has benefit but it is not necessarily enough to markedly change buyer preferences and therefore key performance indicators such as revenue, lifetime value, customer retention etc. In fact, the cost of making an interaction “better” may not be offset by what the company can charge.
In fact great experience (in context of positive emotion at the various interfaces), in some situations may not be even relevant!
Many people know about the Ryanair customer experience, often commented on as indifferent to poor (albeit improving). Fewer people will be aware of the US Spirit Airlines which frankly makes Ryan Air look like lobster and champagne. Spirit is judged as delivering the worst experience of all American airlines, and amongst the lowest performers on the Temkin annual US CX brand survey. Further, a Fracti survey based on 1.2 million tweets indicated Spirit as the worst airline in the world. Kingfisher Airlines on the other hand, had great Net Promoter Scores, won many awards for its customer experience.
So why are Ryanair and Spirit amongst the most profitable airlines in the world as an operating percentage whereas Kingfisher went bust?
The reason for both Spirit and Ryanair’s success is all about customer but involved a dimension that customer experience mostly fails to recognise. Looking at customer experience in the context of easy-to-articulate emotions misses massive opportunity. Both Ryanair and Spirit deliver outcomes to their customers that they repeatedly buy irrespective of how good the overall experience is.
The most effective customer propositions deliver a great outcome as well a distinctive experience associated with outcome. Outcome based thinking creates an understanding of customer needs that is considerably deeper than any survey or focus group can achieve because it forces you to think beyond what the customer currently gets to highlight new possibilities.
Customer experience is still a relatively young discipline that needs to evolve quickly and to widen its scope.
Belief 3 – The most successful companies aspire to understand and follow best practice
Best practice in Customer Experience is reasonably consistently documented. Companies
- Use Voice of Customer technology to capture wants, needs and preferences.
- Utilise technology to scour social channels for passive data and behavioural insight.
- Use Net Promoter Score to measure to what degree a customer will recommend a company or their product.
- Build customer journeys to capture the customer process, measure emotion at the interfaces and improve them.
- Create a CX function with small data collection and journey mapping teams, reporting into either the operations or marketing functions who try to persuade the business to adopt their recommendations.
Answer this question. If every company uses the same best practice approaches in much the same way, what level of competitive differentiation can be achieved? If everybody is adopting accepted best practice how can one company outperform another?
The answer is they don’t. At least not significantly.
What happens if one of the companies identifies and adopts a competitive edge where it finds a way to understand its customers better than its competition and aligns this improved understanding back into the products, services and interactions? Is there a better chance of clear differentiation and better performance? Of course.
It’s exactly the same in competitive sport, stock market trading and many other areas of life. Following the herd leaves you in the herd – no further head and probably no further behind.
Best practice should represent the start point not the target!
Now if I told you a few home truths about the best practice approaches adopted above:
- Customers who are asked about their wants and needs express firstly their most important issue in the moment then an extrapolated view of the product or service under question ie a cheaper, faster, better view from where they are. This is the maximum extent that Voice of customer can derive customer understanding. It cannot touch customer innovation or identify needs that the customer is not aware of or thought about. New techniques exist that are completely proven that can significantly help with those gaps. Voice of Customer is helpful but in isolation it’s NOT a game changer.
- Behavioural data insight is extremely useful to get you “in the game”. It’s relatively cheap to gain access to this insight and it will become more available at lower cost in the next year or so. It is not a game changer. Yes, companies need to do it – but don’t expect to outperform your competition as everybody else will be doing the same.
- Net Promoter Score works well for some companies but has minimal impact for others. It works well for companies where experience and emotion is the primary differentiator. It works poorly for companies where need driven outcome is of importance. Both Ryanair and Spirit mentioned earlier will regularly have poor NPS scores, but it will not impact the success of their business. I have many customers who have told me that increased NPS has shown little impact on the P&L of their business.
- Customer Journey Mapping can be adapted to focus on outcomes and experience and work backwards. Current approaches measure “what currently is” and makes it better. The former has more impact potential. The latter has tactical impact but is rarely strategic.
- How can a Head of Customer Experience reporting into marketing or operations change a product or service centric business to a customer driven one? Quite simply they can make progress, but that progress is often frustratingly slow, and the main focus of the business does not significantly change.
Traditional best practice does have its place but by itself it is not a game changer and you need to identify the competitive edge where disproportionately positive gains can be created.