As featured on BusinessMirror: Wise investments, winning experiences
Adapting to the new reality
According to 80 percent of global CEOs in the KPMG 2020 Global CEO survey, COVID-19 fast-tracked digital transformation efforts, particularly in the digital operations of their organizations. In fact, 30 percent cited their progress as ’years ahead of where they expected to be right now.’
For customers, virtual experiences became the norm, and digital holdouts, who previously shopped for in-person experiences only, migrated into the digital crowd. As health and safety became top priorities, the pandemic not only created more virtual customer interactions but steepened digital adoption curves underpinned by these quickly shifting mindsets and behaviors.
And many of these changes are likely here to stay. As such, organizations realize they need to continue digitizing their operations while protecting and prioritizing revenue growth and improving customer experiences to meet evolving expectations. At the same time, ongoing market uncertainty keeps cost optimization top of mind for executives, as pressures mount to make every investment count. Organizations are fully aware of the need to create exceptional customer experiences to drive loyalty and compete in the new reality, but at what cost to the business?
As our research of customer experience leaders reveals, organizations that are customer obsessed continue to excel in the marketplace, not only because they use customer experience as a point of differentiation but because they are seeing economic returns on their investments. These companies have learned to master customer experience (CX) economics.
CX economics involves striking the right balance between what customers expect and what makes financial sense for an organization to deliver. It’s the ’sweet spot’ that results in profitable growth. Achieving this profitable growth occurs when a business understands its customers’ expectations and tempers them against the returns its CX investments can support and yield. We will explore how the unfolding digital landscape and ongoing market uncertainty will likely continue to influence customer behaviors and impact businesses and highlight how mastering CX economics in the new reality can help organizations deliver quality customer experiences and drive profitable return on investments at a time when it’s needed most.
Exploring CX economics
Deriving economic value from an investment in customer experience relies on having a true understanding of what the customer wants. Advanced tools and new technology can make it easier to harness customer data and insights that help decipher customer preferences, wants and needs. Through a better understanding of the customer experience, an organization can determine and prioritize the type of to deliver and target value to capture from the CX investment(s) made.
For example, which customer experience has a greater impact on profit loss: An over-the-top customer experience or a negative one? It’s no surprise that failing to meet a customer’s expectations can have serious negative consequences. Falling short on expectations directly impacts customer retention and repurchase behaviors, which can result in lower profits and decreased market share. But exceeding customer expectations can also negatively impact profits. Often, the costs of delighting customers exceed the potential value it generates. In their efforts to surprise and delight customers or without proper planning, organizations can generate higher-than-necessary operating costs, which can also result in profit loss.
Enhancing the personalized experience
Personalization is the most valuable component of most experiences. It involves demonstrating that organizations understand their customers’ specific circumstances and will adapt the experience accordingly. Timely, personalized interactions help to reinforce customer satisfaction and drive loyalty. Relevant, real-time personalized interactions are the expected norm. Yet, research shows many firms are still unable to deliver a satisfying personalized experience. The benefits of getting personalization right are significant in improving customer relationships, revenue, cost of acquisition and marketing efficiency.
In the new reality, this will become increasingly important. Customers will continue to demand more personalized experiences that address their evolving needs, and organizations will compete on how to best meet them.
Making the journey worthwhile
For many organizations, investments in improving the customer experience may not generate enough value or provide an acceptable return on investment (ROI). The following four action steps — measure, analyze, prioritize and refine — can help organizations manage the economics of the customer journey effectively.
The excerpt was taken from the KPMG Thought Leadership publication: https://assets.kpmg/content/dam/kpmg/xx/pdf/2022/02/wise-investments-winning-experiences.pdf