Asking why customer experience matters is kind of like asking why oxygen matters.
Much has been written about the importance of customer experience (CX), and many studies have suggested that customer experience will be the next great corporate battlefield. In fact, a 2014 Gartner study found that by 2016, 89% of companies expect to compete mostly on the basis of customer experience, versus 36% four years ago.
What is Customer Experience?
It’s important to recognize that customer experience does not occur in a vacuum. It’s the sum of every interaction that a customer has with a brand – offline and online.
Let’s look at a fictional example of a fast food restaurant. It’s easy to say that the taste and quality of the food play a huge role in the overall customer experience. But if we stop there, we miss so many other components of the experience that help determine whether or not a customer leaves satisfied. In other words, the good-tasting food is a necessary component of a positive customer experience, but it may not be sufficient by itself.
What other parts of the experience contribute to overall satisfaction? The availability of parking, the friendliness of the order taker, the acceptance of a preferred payment method, the speed of the service, the variety of condiments available, the temperature of the restaurant, the ability to find a seat, and – if you have kids this ranks near the top – the cool factor of the toy that comes with the kid’s meal.
Note that all of those examples are “off-line” experiences. What about online? Our perception of a brand is also affected by its website and mobile app (Does it offer a full menu? Ordering capabilities? An easy way to contact the restaurant?), its digital marketing (Do I get too many e-mails? Are they relevant? Are there online coupons?), and its social media (Is there interesting content? What benefit do I receive for following the brand? Are they responsive to questions?).
Customer experience is the sum of every interaction that a customer has with a brand – offline and online.
The other part of the CX equation is customers’ perception of their interactions with the brand. As the old maxim goes, “perception is reality,” so it’s critical that brands truly understand how their customers are interacting with them and what it’s actually like to be a customer.
Too often brands build experiences that serve their own purposes but neglect to consider how a customer will feel in the middle of it. To alleviate this blind spot, brands should involve their customers in the creation of experiences – both online and offline – to ensure they understand their point of view.
How is Customer Experience Measured?
There are a variety of ways to measure customer experience, and to get a complete picture brands should incorporate several of them into their CX dashboards.
The first way to measure CX is to simply ask your customers. Whether this is through traditional customer research like surveys or focus groups, or through user testing of specific experiences, ask and you shall receive feedback.
Another way to measure CX is essentially the converse of the first way: let customers come to you, and measure their sentiment. This is also called Voice of the Customer. It can take the form of direct feedback through existing customer service channels, ratings and reviews, third-party discussion boards, social media listening, etc.
Finally, brands can turn to third-party evaluators to measure CX. Companies like Forrester and J.D. Power have different proprietary methods for measuring satisfaction, which usually provide objective, quantifiable and actionable results, as well as valuable competitive data. Keep in mind, though, that a brand’s goal should not be to win an award or “beat” a survey. The goal should be to provide a best-in-class customer experience, which will in turn lead to positive results in third-party evaluations.
Why is Customer Experience Important?
Although conceptually most brands understand that providing their customers with an amazing experience is a good thing, some brands still need to be convinced that doing so also leads to positive business results. Thankfully, the research supports this claim.
Forrester looked at the correlation between customer experience and several loyalty metrics – including willingness to consider the company for another purchase, likelihood to recommend to a friend, and likelihood to switch to a competitor – and found a statistically significant correlation with each of them.
Higher retention rates and more customer referrals lead to more overall usage, which leads to higher revenues. But CX also has a positive effect on the other side of the profitability coin, which is cost. It stands to reason that an outstanding customer experience reduces customer service inquiries and regulatory fines, both of which can become quite costly to brands doing it wrong.
A Watermark study took it a step further and looked at the eight-year stock performance of both the leaders and laggards of Forrester’s Customer Experience Index, and found that the leaders’ stocks far outperformed the S&P 500 while the laggards vastly underperformed against the benchmark.
One other reason that CX is important is social media. Both great experiences and poor ones tend to get shared publicly with others, making it that much more critical that companies get the experience right the first time.