April 19, 2016
Not surprisingly, most executives whom Forrester surveys want their organizations to deliver a better customer experience and to become more customer-centric. But few organizations are achieving this aspiration: 82% of brands in Forrester’s Customer Experience Index (CX Index™) got scores of “OK” or worse by customers.
Stakes in the race for customer experience excellence are high: Each year, billions of dollars in revenues are in play, to be won or lost due to customer experience. Many organizations are at risk of losing customers and revenues to competitors and digital disruptors that can provide a better customer experience and respond more nimbly to changing customer needs.
Executives often ask Forrester how to deliver a better customer experience. I’ve summarized their most common questions and the answers that we base on our consulting work and research:
Q: What do you mean by “customer experience”?
A: Forrester defines customer experience broadly: It’s how customers perceive their interactions with an organization. These interactions range from their overall relationship to specific customer journeys and touchpoints, both digital and nondigital.
Q: Why does customer experience matter? How does it affect financial results?
A: Better customer experience improves customer loyalty, which leads to better financial results. Forrester has modeled the revenue upside of customer-experience-driven customer loyalty by asking consumers about their intent to stay with, buy more from, and recommend an organization they do business with. Each 1% improvement in customer experience quality — as measured by Forrester’s Customer Experience Index — results in an additional $15 million to $175 million in annual revenues.
Where an organization’s benefits fall within that range depends on how easy it is for customers to switch to a competitor. The easier it is to switch, the more impact customer experience has on customer loyalty and revenues. And in many industries, competitors can easily match product features and price but have a harder time replicating a great customer experience. And even organizations that are sole suppliers (e.g., a utility) or have customers that cannot easily switch (e.g., due to contracts) need to care about customer experience. A better customer experience can lower the cost of service, improve employee engagement, and boost customer advocacy.
Q: Isn’t customer experience more of a concern for B2C organizations?
A: The customer experience leaders that Forrester talks about in its research tend to be B2C. Brands like Amazon and Apple have set a high bar for customer experience. But that bar doesn’t just apply to B2C customers. B2B customers expect a similar level of customer experience quality in their work life and their personal lives. Even so, B2B customer experience has its own nuances. For example, in each B2B account, there are often multiple “customers” with different roles and interactions with a B2B provider. The person who makes the purchase decision has a different experience than someone who influences that decision, and users of the product or service have yet a third experience with the B2B firm.
Q: How do I know if my organization needs to transform its customer experience?
A: Potential indicators of the need to transform customer experience include:
- Customer retention efforts that aren’t working.
- Difficulty cross-selling and upselling to existing customers.
- Declining customer lifetime value (CLV).
- Low or declining customer satisfaction scores or Net Promoter Score (NPS).
- Low employee engagement.
- Changing dynamics that let customers interact in new ways (e.g., digital or mobile).
- Threat of new entrants that could disrupt an older, more established industry.
Q: How does an organization begin to transform to provide a better customer experience?
A: Transforming customer experience requires a strategy — a vision for what an organization wants the experience to be and a plan to make it happen. Customer experience professionals whom Forrester surveyed identified the lack of a clear strategy as the biggest obstacle to customer experience success.
In a follow-up to this blog, I’ll provide details on Forrester’s recommended approach to overcome this obstacle a.nd transform customer experience as well as lessons that we’ve learned from our consulting work
- customer experience
- customer experience index (CX Index)
- customer experience measurement
- retention management