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Profitable Customer Experience: Why Your Strategy May Fail
Some things are self-evident. If you look after customers and provide great customer experience, they will tell friends and return again and again driving revenue growth and profits. We believe great customer experience is a fundamental requirement of every business and is fully justified by building customer loyalty. However, there are instances where providing great customer experience may not immediately translate into visible dividends.
A company may design a well-thought-out customer experience initiative but fail in its execution. For example, if the frontline employees are not adequately trained or motivated to deliver the desired experience, it can undermine the entire initiative and lead to disappointment among customers.
It is also important that a company doesn’t promote excessive customer experience expectations that it can’t deliver. That will result in cognitive dissonance which is the psychological discomfort we suffer if we make a purchase and feel let down.
With the rise of omnichannel customer experiences, maintaining consistency across various touch points and channels is crucial. If a company excels in providing great experience in one channel but falls short in others, it can lead to a fragmented and disjointed experience for customers.
Below are key aspects to think about when designing a successful customer experience.
Coordination across departments
To deliver a great customer experience, it's vital for different departments within a company to be aligned and work together seamlessly. If there is a lack of coordination or internal silos, it can hinder the successful implementation of customer experience initiatives, resulting in an inconsistent experience for customers.
Some companies, especially small ones, can deliver great experiences but are quite happy to hide their benefits under a stone. A lot of small businesses just don’t want to grow. They deliver brilliant customer experience but have no willingness to create awareness of their business and communicate its value proposition to a larger market. Satisfied customers may tell their friends but if the pool of friends is small and confined, potential customers will remain unaware of the company and its wonderful service.
Even if a company offers great customer experience, customers may be swayed by other factors. Ryanair’s low cost and broad flight availability, for example, draws many people who are prepared to forgo the higher level of customer experience of a high-priced legacy airline. Of course, if an airline offers both good value and great customer experience (such as Southwest Airlines in the US), it almost certainly will succeed. It should be pointed out that in its maturing years, Ryanair has recognized the importance of treating customers with more care for it knows they have a choice. It wouldn’t take much for them to drift to EasyJet or Wizz.
Understanding customer needs
Not all businesses are great at understanding their customers’ needs. They may invest heavily in delivering what they believe to be an outstanding customer experience, but if they fail to understand the specific needs of their target customers, it may not resonate. The customer experience must align with customers’ expectations and desired outcomes. Take Blockbuster for example. In the late 1990s and early 2000s it dominated video rental. It focused on stores where customers browsed and rented movies and video games. As technology advanced, the emergence of online streaming and digital downloads disrupted the video rental industry. Instead of recognizing the shift in customer behaviour towards digital consumption, Blockbuster maintained its emphasis on the bricks-and-mortar model and went bust. Netflix meanwhile, a DVD-by-mail rental service at the time, recognized the changing landscape and customers' desire for convenience. Netflix introduced a subscription-based model that allowed customers to rent DVDs online and have them delivered to their homes, eliminating late fees and offering a broader selection. Eventually, Netflix transitioned into a streaming service, further capitalizing on customers' preferences for instant access to content.
Consistency and patience
Building customer loyalty and reaping the rewards of exceptional customer experience takes time. It requires consistent efforts and a long-term perspective. We have worked for many businesses measuring customer satisfaction and on a number of occasions we have seen leaders lose interest in the customer experience initiative. Some businesses could not see immediate dividends; some believed they had finished that “project” and turned their attention to other things. It’s not unusual for the investment in customer experience to be cut if a company is suffering a fall in profits. What they fail to consider is that maintaining the investment in customer experience is like maintaining the thrust of an airliner in flight. Turn off the engines of the airliner or cut the investment in customer experience and things will continue for a while but soon there is sure to be a disaster.
Providing great customer experience at one touch point or interaction is crucial, but it's equally important to maintain consistency throughout the entire customer journey. If there are gaps or inconsistencies in the overall experience, it may undermine the positive impact and fail to generate dividends. We should also remember that people’s needs change during the customer journey. When a new customer is on-boarding, they will appreciate a good deal of handholding. Once they are an established customer their needs will change and they may be looking for some help in their own struggle against competitors. Customer experience is not great if it is delivered to a point on the customer journey from which the customer has moved.
And finally, external factors can influence customer behaviour and purchasing decisions. Even if a business excels in providing great customer experience, external factors might override the immediate impact and delay the dividends. Borders, for example, was a prominent bookstore chain in the US. It was known for its extensive selection of books, store ambience and helpful staff. It was loved by book lovers. However, Borders faced external challenges. There was the rise of e-commerce and digital books. Online retailers like Amazon stole market share and e-books significantly impacted its traditional bricks-and-mortar bookstores. The global financial crisis of 2008 added to Borders' troubles. There was reduced consumer spending and tightening budgets which led to a decline in book purchases. These economic and external factors ultimately led to Borders' downfall and in 2011 the company filed for bankruptcy.
In summary, we know that companies offering great customer experience will grow a loyal customer base and enjoy increased revenue and profits. There are occasions when the benefits of investing in great customer experience aren’t always apparent. This could be because the company doesn’t wish to grow, or it may be that they have misaligned its customer experience with its customers’ needs. There is a possibility that the customer receives great experience at a point in their customer journey where it isn’t relevant. And sometimes the competitive environment is so fierce that no amount of great customer experience can overcome external forces. It's important to note that while immediate dividends may not always be apparent, investing in great customer experiences has long-term benefits. Positive word-of-mouth, brand reputation, customer loyalty and the potential for repeat business can contribute to sustained growth and profitability in the future. Overall, great customer experience contributes to customer satisfaction, loyalty and advocacy, leading to increased sales, revenue growth and a strong brand position in the market.