August 28, 2012
Customer experience is fundamental to the success of every business. For most companies, in fact, customer experience is the single greatest predictor of whether customers will return — or defect to a competitor.
Customer experience goes to the heart of everything you do: how you conduct your business, how your people behave when they interact with customers and each other, and the value you provide. You literally can’t afford to ignore it, because your customers take it personally each and every time they touch your products, your services, and your support.
In our new book, Outside In, my coauthor, Kerry Bodine, and I explore the real meaning of customer experience; prove the business benefits of delivering a great experience; and describe the six disciplines of customer experience leaders like American Express, JetBlue, Office Depot, and Vanguard. Our goal is to help readers understand why and how customer experience leads to profits — which it does, but only if you treat it as a business discipline.
Why is customer experience so important?
“Customer experience” is literally how your customers perceive their interactions with your company.
Those interactions occur at each step along a customer journey. That journey begins when people realize that you offer a product or service they might want, then compare your offer to other options. If things go your way, they’ll buy from you. Then they’ll use what they bought. If they encounter a problem, they’ll call for support.
At each step of their journeys, your customers judge the experience on three levels: how well you meet their needs, how easy you are to do business with, and how enjoyable you are to do business with. It won’t come as a shock that if you satisfy their needs, don’t make them work too hard, and don’t annoy them, you’re more likely to earn their business the next time they buy.
Of course, the relationship between customer experience and loyalty makes intuitive sense. But now we can prove it. For five years, we’ve run a large-scale consumer study that we call the Customer Experience Index. What we’ve seen is that customer experience correlates strongly to the most common loyalty metrics, including the willingness to consider for another purchase and the likelihood to recommend. The correlations are so strong that it’s likely that nothing else you do matters more than customer experience.
You don’t have to take our word for it. A firm called Watermark Consulting didn’t. They used our data to prove it for themselves by calculating the performance of a portfolio of publicly traded companies that are leaders in our Customer Experience Index. Over the past five years, a period when the S&P 500 was essentially flat, that portfolio produced a cumulative total return of just over 22%. During the same period, a portfolio of customer experience laggards returned –46%. Not only do customers reward a superior experience, so do the markets.
How everything you do affects the customer experience that you deliver
One of the case studies we describe in our book tells the story of John Birrer, the senior vice president of customer experience at Charter Communications. Researching a recurring problem with software installations at Charter’s business customers, he found the problems could be traced back to a combination of seemingly unrelated decisions by sales reps, the human resources department, and the company’s lawyers — all of whom were blind to the poor customer experience that resulted from their efforts.
Birrer was able to uncover the root causes of the problem by mapping Charter’s customer experience ecosystem: the complex set of relationships among a company’s employees, partners, and customers that determines the quality of all customer interactions.
As it turned out, Charter’s sales reps got their commissions based on sales, not installations, so they hadn’t focused on technical requirements during the sales process. The human resource managers who’d approved the sales reps’ compensation plan were unaware that the plan had a flaw. And Charter’s lawyers, who had created a policy prohibiting the Charter technicians from touching client hardware — thus preventing them from resolving the installation problem — had no idea of the consequences of their policy.
Once John Birrer brought these relationships to light, Charter was able to solve the installation problem. That’s because the customer experience ecosystem is the single most powerful framework for diagnosing and then fixing customer experience problems in ways that make the fixes stick over time.
Make no mistake: If you have customers, you have a customer experience ecosystem. And if you‘re wrestling with a big, thorny customer experience problem, then something has gone wrong with its complex and interdependent relationships.
If you want to fix your customer experience problems, you need to understand and take control of your customer experience ecosystem. That’s exactly what customer experience leaders at companies as diverse as FedEx and Virgin Media in the UK are already doing today.
From bumper sticker to business discipline
To achieve the full potential of customer experience as a business strategy, you have to change the way you run your business. You must manage from the perspective of your customers, and you must do it in a systematic, repeatable, and disciplined way
Take USAA, a diversified financial services organization. USAA has long been a leader in customer experience because it is mission-driven to serve members, and is blessed with a customer-centric culture. But two years ago, its executive team concluded that in order to be fully customer-centric, it required a world-class voice-of-the-customer program so it could understand member needs in new and deeper ways. It required a customer segmentation scheme based on those needs to guide the design of products and services. It required an organization and governance structure that would let USAA go to market in a radically different fashion that spanned traditional product silos. In short, what USAA needed was a radical transformation in the way it did business.
Wayne Peacock, USAA’s executive vice president of member experience, sums it up this way: “We iterated the customer experience over a five-year period. We made incremental progress. But you come to an inflection point where, if you want to go further and you want to go faster, you have to make a change.”
We see similar large-scale commitment at a growing number of leading organizations. They include Cisco Systems, Cleveland Clinic, Fidelity, and Southwest Airlines. That’s a list of highly respected brand names that speaks for itself.
Will your company join that list? Will you commit to transforming the customer experience at your organization — or will you conduct business as usual and hope for the best? We know that customer experience transformation is hard; that’s what our research on thousands of companies reveals. And that’s why you need to treat it as a business discipline. That’s the lesson of Outside In.
Check out this video, where my coauthor, Kerry Bodine, and I discuss the main themes of Outside In.