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Customer Experience: The Path to Loyalty

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At the 2010 Clarabridge Customer Connections conference, Bruce Temkin, vice president and principal analyst at Forrester Research, Inc. (and the most read Forrester analyst for three years running) discussed customer experience as a path to loyalty, heck, as a yellow brick road to loyalty.

Customer experience management is about changing your business, which means we need to be change agents. What are the three key lessons we can learn from The Wizard of Oz as we transform our companies to be more customer centric?

• Heart - We need to be more sensitive and in tune with our customers, knowing what makes them happy or sad. Becoming customer centric requires catering to customers, employees and partners.
• Brains - We need to use our brains. We can't think of customers as one big group; we need to understand customer segments in more detail than ever before.
• Courage - It takes courage to change how a company operates. "There is no constituency for change," Bruce often says. Large organizations suffer from inertia.

Elaborating on this point, Bruce answered three questions.

• What is the current state of customer experience efforts?
• How is customer experience management evolving across organizations?
• What are the key trends for customer experience?

What is the current state of customer experience efforts?

Of 141 North American companies with $500+M in revenues, 13% use CEM to differentiate themselves from all firms across any industry, 67% to differentiate within their industry, 13% to maintain parity with other leaders in their industry and 4% to keep from falling too far behind industry leaders. Of respondents, 62% are implementing a Voice of the Customer program; 14% are actively considering a program. Sixty-three percent (63%) are using a single set of customer feedback scores across the company and 19% are actively considering.

Bruce looking across 130 companies rated by his CxPi and differentiated customer-experience leaders (top quartile of industry peers) from laggards (bottom quartile of industry peers). Leaders have 6.7% more customers willing to buy more products (laggards have 7.7% fewer). In fact, across willingness to buy, reluctance to switch and likelihood to recommend, leaders outperform laggards by an average of 15%. Customer experience drives more loyal customers. Turning that into a model for a $10 billion company, Bruce estimates a modest shift in customer experience can produce $65 million in more sales to existing customers, $116 million in reduction in churn and $103 million for sales from word of mouth, for a total of $284 million impact.

Only three of the 14 industries rated by the CxPi have industry averages that are good: retailers, hotels and parcel delivery/shipping firms. The other 11 industries have significant opportunities for improving customer experience. Only 13 companies out of 133 received excellent ratings on the CxPi. Plenty of room for all of us to improve.

How is customer experience management evolving across organizations?

In a Forrester self-test of organization competence at CEM, the five lowest scoring areas were: employees share a vivid image of target customers (only 24%), decision making incorporates the needs of customers (30%), quality of customer interactions is closely monitored (31%), employees across the company are recognized and rewarded for improving the experience of target customers (31%) and senior executives regularly interact with target customers (40%).

"Companies are from Venus, customers are from Mars," Bruce said, emphasizing that the gap between companies and customers is a thousand times wider than the gap between the genders. Customer needs, desires, interest and knowledge have little to do with your company and for only a short period of time. Employees have high knowledge of how the company works, have a large interest in the topic, a varied understanding of customers, and clash with one another for politics and egos.

To bridge the divide between customers and companies, we need to focus on what Bruce calls experience-based differentiation: this is Forrester's blueprint for changing your organization. Your organization needs to obsess about customer needs rather than product features: your customers are not just users. You need to reinforce the brand with every interaction, not just communications (don't think of brand as esthetics but as who you are as a company); "too many companies have lost their soul, their reason for being". Finally, treat customer experience as a competence, not a function; every employee needs to have this skill and outlook.

What are the key trends for customer experience?

Six key trends:

1. Customer service is moving from a cost center to a loyalty driver
2. Onboarding, bringing new customers to where they are deriving value from your organization, requires rebuilding
3. Voice of the Customer is an enterprise asset, growing from departmental silos
4. Unstructured and unsolicited data represents buried treasure to be dug up
5. Customer feedback is being reexamined as an input to take action on
6. Organizations are moving to customer-centric cultures

When it comes to using your heart, brains and courage to follow the yellow brick road to great customer experiences, Bruce is no showman wizard. Check out his blog, http://experiencematters.wordpress.com/, for more detail on customer experience management.