When it comes to making customers happy, good enough isn’t good enough. Since 2009, we have found that average customer experience performance has been worth about 5 – 10 percent less in terms of key measures like ‘likelihood to remain/renew’, ‘to buy another product’ and ‘to recommend’ for companies each year in industries we have analyzed. At the same time, however, improving customer experience from average to ‘wow’ is worth 30-50 percent more in those same industries.
Building profitable customer loyalty through improved customer experience requires understanding a critical third trend underway: Customer satisfaction and loyalty is increasingly determined by the complete set of customer experiences across multiple interactions with the brand. These experiences are associated with discreet customer needs (e.g., sales-on-boarding, end to end problem resolution), and we call them Customer Experience Journeys.
Delivering on the entire Customer Experience (CE) Journey is much more important than improving any single point of interaction with the customer.
New trends in customer experience
Data from surveys conducted with more than 60,000 consumer respondents paints a stark picture. In pay TV, customers’ stated loyalty has dropped by a total of 20% since 2009 to companies providing average levels of customer experience. In banking, despite industry-wide efforts to rebuild trust in that sector over the past 3-5 years, customers report their loyalty to companies that are average at customer experience is 30% lower than in 2009.
Similarly, the loyalty lift that ‘wow’ creates in customers that have previously experienced ‘average’ is growing. In banking, the loyalty lift from moving from average to ‘wow’ on measures such as likelihood to remain, to buy another product and to recommend is 2x higher now than in 2009. In pay TV, reported loyalty is 1.5x to 2x greater. The impact of moving dissatisfied customers to average has also shown a similar loyalty trend.
Why is this happening? In part, because consumer expectations are rising. In part, also because consumer empowerment is increasing. Consumers are used to using increasingly sophisticated channels and tools, and they expect them to work well. A number of industries are also increasingly setting higher expectations for others (ie, if FedEx can track my package, why can’t my insurance company track my car repair?).
Increasing ROI on customer experience investments
Extrapolating from these trends, there are three initial implications we believe are important to highlight:
A. Build for bold (or go somewhere else):
Companies pursuing a meaningful customer experience strategy must be clearer about whether they are participating to win or simply to improve. More than half of companies claim an aspiration to be top in customer experience in their industry in the next 3 years according to a recent market survey. Not all can win that title.
To get there, some companies will need to take a hard look at whether they are truly committed to winning. Incremental improvements will not do; in many cases, it would be better to save the money and focus on other things.
While companies can start small (ie, test labs to prove concepts), aspirations must be clear and bold to gain ground rather than simply maintain it.
B. Get the economic model right:
A more fundamental science is needed to optimize ROI on customer journeys. First, companies should quantify the value more carefully. That begins with specifying that value is at stake by estimating the number of customers they will touch and their value. Companies should forecast that value equation (ie, what will the relationship value be in 2-3 years vs. today). And, then, companies must quantify the lift associated with the program overall and each key strategy (ie, what is the impact on retention of moving 20,000 millennial customers from a ~6 to a ~8 on a customer experience scale in 2015?).
Second, these business cases – based on rigorous analysis – should guide all customer journey initiative investment. However, they tend to focus on overly-narrow sources of value or are too optimistic about topline impact. Challenge the business cases by focusing on direct operational benefits in the near term, such as those driven by end-to-end process improvements (ie, reduce inbound calls; reduce rework; automate specific interactions/activities).
Third, don’t forget to consider lower cost/lower investment options. Too many customer journey improvements focus on building out large, IT-intensive systems rather than small prototypes that can be quickly tested. Using expectation and perception management, behavioral psychology and/or emotional drivers of the experience can often deliver great experiences with lower costs.
C. (Re)Allocate investments where they will do the most good:
This seems obvious, but is hard to do in practice. Many companies will focus on addressing the affect rather than the root cause. For example, reallocating investment from a call center to address issues changes upstream (e.g., retraining sales capabilities for appropriate expectation setting or re-designing bills to be easier to understand) may be the right move.
Most companies do some form of most of these practices. However, too few hard-wire them into their customer experience program. The difference between average and optimized ROI is about the attention to detail and discipline. That will ultimately be mutually beneficial with speed and success.
Important questions to ask
Each company is unique, but there are a set of tactical questions that clients have found helpful to start a self-assessment. They include:
- Have you quantified the value of your CE program at a customer level and identified the points where investments don’t return sufficient value (ie. breakpoints)?
- What is your shortlist of 1-2 customer journeys that matter most?
- Do you have end-to-end KPIs for your most important journeys, or just individual touchpoint metrics?
- Have you hardwired CE team resource requests to use low cost process, policy, and operational options before turning to CapEx-intense elements (e.g., IT)?
- Do you have a formal mechanism to run and evaluate CE tests at scale and book the impact with finance?
- Do you have a forcing mechanism to solve tradeoff decisions across functions in order to deliver on bolder CE aspirations – and if so, how often do you use it?
This article originally appeared on Forbes