ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Customer service blunders may be entertaining when they are lampooned in the media. In real life, however, shoppers who have been put on hold for hours or had packages go astray are unlikely to be amused. The COVID-19 outbreak brought about major changes in consumer behavior, pushing retailers to adapt quickly to meet customer demands and expectations—and today, those expectations continue to rise ever higher. Delivering a memorable customer experience (CX)—which we define as everything an organization does to provide superior experiences, value, and growth for customers—could be a game-changing competitive differentiator for companies if managed properly.

AN IDEA

Use AI to elevate the customer experience

AI-based customer service transformations show great promise, but rising customer expectations, transaction complexity, and shortage of skilled labor may pose challenges. “Leaders in AI-enabled customer engagement have committed to an ongoing journey of investment, learning, and improvement, through five levels of maturity,” note McKinsey senior partners Greg Phalin, Renny Thomas, and colleagues. For example, organizations at Level 1 may still deploy paper-driven and high-touch interactions, but organizations at Level 5 may handle more than 95 percent of their customer service via AI and digital channels. A financial institution implemented an AI-powered transformation that increased self-service channel use, achieved a 40 to 50 percent reduction in service interactions, and decreased cost-to-serve by more than 20 percent.

A BIG NUMBER

4

That’s the number of core steps in the new playbook that retail companies—whether they sell to consumers or businesses—may need to follow to create a deep connection with customers, according to McKinsey partner Marco Catena and colleagues. For example, developing new services is an important second step in the process. “The right portfolio of services will be based on a detailed understanding of the loyal customer base—in particular, how relevant the services are to them and whether there are unmet needs that you as a retailer can fulfill,” says Catena. “[A new service] should not be random but clearly and coherently match the brand values, purpose, and capabilities of the company.”

A QUOTE

“The convergence of CX and design may very well define the next world of customer experience.”

That’s McKinsey senior partner Ewan Duncan and coauthors in an article on how combining traditional CX practices—such as capturing and analyzing customer data and sentiment—with user-centered design processes can result in customer journeys that deliver powerful impact. For example, design approaches can enhance quantitative data with insights from ethnography, psychology, and human factors to shed light on the motivations that underlie consumer behavior. Embedding design thinking into CX may need a shift in mindset, however, with customer-centric thinking becoming “a core capability for everyone across the organization, from the C-suite to frontline employees,” suggest the authors.

A SPOTLIGHT INTERVIEW

“Successful strategies are founded on the notion that consumers are in charge,” says McKinsey senior partner Becca Coggins in a podcast on the changes taking place in the retail industry. “The retailers that embrace consumer-driven commerce are the winners.” In particular, “zero consumers” exert considerable influence: these are people who shop across a variety of channels, have zero loyalty to specific brands, zero patience in waiting for delivery, and care about net zero, or sustainability. Winning over these consumers may involve capturing “share of life”—offering shoppers unique or unexpected ways to incorporate a specific retailer into their lives—as opposed to just share of wallet. “It’s important for retailers to go beyond the core of what we would call omnichannel retail—or even go beyond services,” observes McKinsey partner Steven Begley. Companies that go beyond their core omnichannel retail offerings stand to generate considerable revenue, he adds: “Our work suggests that, for most retailers, less than 10 percent of their revenue sits in those businesses today. But within five years, those businesses could be as much as 40 percent of the profits.”

– Edited by Rama Ramaswami, senior editor, New York

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