Brands are becoming increasingly aware of the importance of a strong Customer Experience (CX). And, as our research of customer perceptions indicates, many brands are making great efforts to improve their CX. Yet not all investments into CX deliver equal value – for the customer or the brand. That's why today's top brands are seeking to quantify the true value of CX, balancing customer expectations and experience to invest their capital where it will deliver the most value.
Nobody knows exactly how the COVID-19 pandemic will evolve. What we do know, however, is that it has already influenced what customers expect and the way brands operate. In this environment, brands will need to recalibrate their understanding of the balance between customer expectations and customer experience. More importantly perhaps, they will need to react to them – quickly and appropriately.
At the same time, the crisis has forced many brands to refocus their business and reallocate investment. Restaurants, for example, quickly pivoted from in-store dining to delivery. Retailers dramatically enhanced their online capabilities. Supermarkets rapidly reconfigured their stores and invested into new health and safety measures.
But how do these investments actually impact customer experience? What value are they delivering to the customer relationship? Which investments are the right investments to maximise value and meet customer expectations? In an environment where brands are undertaking significant changes and every euro counts, it is critical that decision makers understand the economic value of their investments into customer experience.
Finding the right balance between what customers expect and what a brand should deliver is critical to creating value. For most brands, the natural inclination is to try to delight the customer across the end-to-end customer journey. But surpassing customer expectations can often drive up costs unnecessarily and could even lead to diminishing returns.
During the immediate COVID-19 crisis, a number of retailers invested into 'next day' and 'same day' delivery options. Yet, in many cases, customers would have been just as happy (if not more so) receiving the items later, but at a time of their choosing. Had these retailers aligned their investment to customer expectations, they could have improved satisfaction and optimised value.
On the other hand, brands that underinvest into the right CX improvements will fall short on customer expectations, directly influencing customer retention and repurchase behaviour. And that can lead to lost revenue and market share.
Finding the right balance between customer experience, customer expectation and value, therefore, is critical and core to the principle of CX Economics.
At its core, CX Economics is all about integrating CX data with financial data to gain insights into the value of CX investments. But to do this, brands must first bring together their customer journey and customer experience data – metrics such as cost to serve across products, segments, channels and touchpoints – and connect it together in a way that allows them to evaluate assumptions and opportunities.
Consider the example of a customer that is forced to work from home due to the pandemic. One morning, the customer finds that her Wi-Fi router is not functioning and she is unable to connect to the Internet for work. She raises a complaint with the internet service provider and requests the problem be resolved as soon as possible.
In this scenario, multiple departments (likely including Customer Service, Operations and Logistics) may be required to work together to achieve resolution. Together, they must decide how best to serve the customer. And, in doing so, they need to strike a balance between cost, customer satisfaction, and value: both direct customer value such as up-selling opportunities and indirect value such as enhanced customer loyalty.
Understanding the cost to serve the customer requires brands to understand multiple elements. For example, costs may vary significantly depending on the channel the customer used to log the complaint. Cost to resolve the issue may also differ depending on whether a person is sent to fix the router or a new product is sent directly to the customer.
Calculating the cost will require brands to achieve deep insights from their underlying data. What is the resolution rate? What are the complaint handling costs per channel? What effort does it take to repair? What are the return costs and rate of return for logistics?
Similarly, customer satisfaction can also differ per channel and resolution option. Customers who talk to well-informed human agents are often more satisfied than those who must deal with badly programmed chat-bots. At other times, machines may be the customers preference; many customers would prefer to track their orders online rather than take the time to talk to a service agent.
The way the complaint is resolved also can impact customer satisfaction and revenue. If the customer in our scenario misses a number of work days while waiting for a service technician to arrive, satisfaction will likely be low and the customer will likely leave at the next opportunity. In that scenario, the Internet provider may have been better served sending a replacement product and walking the customer through the install virtually or over the telephone.
By examining these three metrics – cost, customer satisfaction and value – together, brands can start to properly validate (or disprove) their CX assumptions. And by linking this view across the customer touchpoints, brands can start to uncover new end-to-end, cross-functional insights that can deliver significant value.
Visualising these insights across the customer journey enables organisations to focus on the parts of the customer experience that matter most. And, in this way, CX Economics can provide a foundation for balanced, experience-focused and fact-based CX investments that ultimately lead to a business case for change.
In the new reality, the top brands will be those that make smart investments into their CX to create real value – for customer and for brands.
For any further queries you can get in touch with Myrthe Baars.