As outlined in our most recent Insights paper, the world of retail is undergoing significant disruption due to the influence of both modern technology and the shifting expectations of consumers. This paper will outline why, in this volatile new market, companies hoping to increase or even maintain their customer retention rates must optimise their entire customer experience (CX), not just their customer service.
Customer service vs customer experience
At the highest level of distinction, customer service addresses what a business is doing to help its customers, whereas CX addresses what a business' customers are thinking and feeling1. In essence, it is about a company seeing its behaviour through its customers' eyes, not just its own.
"[Customer experience is the] sum total of the interactions that a customer has with a company's products, people and processes. It goes from the moment when customers see an ad to the moment when they accept delivery of a product - and beyond."
Richard Owen, Vice President of Dell Online Worldwide2
CX comprises the totality of a customer's experiences with a business, from research to purchasing, product/service use, and post-purchase support. As such, this means everything from UI/UX, product/service offering, and customer service are all key factors of CX3,4. In order to deliver a winning experience, then, a company must look beyond the direct conversations they have with their customers and optimise every single touchpoint.
"Focusing solely on customer service to improve the customer experience is like taking three wheels off your car and expecting it to perform optimally."
Prem K Viswanath, Cloud Cherry5
The impact of getting it right
Effective CX can have dramatic effects on a business' bottom lines. Almost ¾ of senior executives believe strong CX impacts the willingness of a customer to be a loyal brand advocate6,7. This is reflected in consumers' own opinions: 68% of online shoppers rate their past experiences with a retailer as an important factor when shopping online8. As a result, a company who perfects their CX will see significant benefits due the creation of these brand advocates who will not only be more likely to come back to the business, but they will also be more likely to actively promote it9.
Advocates can be especially vital in an economic down turn: companies delivering a strong CX decline less during these periods and recover faster when the economy picks up10. In fact, a study by Walker showed that, by 2020, CX will have overtaken price and product as the key brand differentiator11. But this goes further than just increased loyalty: 86% of customers are actually willing to pay more for better CX5.
"Customer experience is the new marketing… [it] better be at the top of your list when it comes to priorities in your organization."
Steve Cannon, President and CEO, Mercedes Benz USA12
Why customer experience is a cross-sector concern
Many companies may consider themselves immune to the rising importance of CX due to few complaints and strong customer feedback. Unfortunately, however, the absence of negative feedback is not equivalent to satisfaction11, so this cannot be taken as a metric of CX. 2/3 of customers site poor experiences as a reason for leaving a company, but only 1/26 actually complain. The rest? They simply leave13.
Further, even those who consider their CX to be strong may still need to address it, as retailers' perceptions of their efforts do not equate with the reality of their delivered experiences. Research by Bain & Company suggests that, while 80% of organisations rate their delivered CX as superior, just 8% of customers believe they are receiving a great experience14. Given the impact strong CX can have, this disconnect between delivery and expectations clearly demonstrates the significant potential for widespread disruption caused by a company perfecting their CX.
Unfortunately for many established retailers, this is exactly what is unfolding right across the retail sector. Several new-age companies like Amazon, Spotify, Netflix, and Uber are sending shockwaves throughout the world of retail by placing CX above almost all else. Due to the ubiquity of these on-demand service providers, consumer expectations are shifting across the board as a "Millennial Mindset" becomes prevalent15. A customer who is constantly receiving standout experiences in one area will come to expect these same experiences in others. As a result, companies are no longer just compared to their direct competitors - increasingly, customers are expecting the same quality of experience across the board 5,7,8,16. Indeed, if a small disrupter is able to deliver an exemplary CX, customers will actually expect even more from a large company like a bank or an automotive dealer5.
"Because today's shoppers are empowered with more retail choices — from small neighborhood merchants to online marketplace giants — delivering an exemplary and consistent customer experience is essential."
‘UPS Pulse of the Online Customer'8
This actually goes some way towards explaining one of the commonly associated attributes of millennials: that they are fickle customers. Contrary to this belief, they can actually be very loyal, providing that they feel they have been treated properly17. Having had the greatest exposure to these new-age retailers, millennials' expectations have simply shifted more dramatically than those of the wider public, which has given rise to this misconception. Rather than dismiss their demand for an individual customer-centric CX as a mere generational trait, retailers must focus on "making the customer experience just as important as product and price considerations within the company"17.
Indeed, given this demographic's significant purchase power and cross-generational influence15, established companies must act now to bring their approach in line with CX leaders like Amazon or risk losing their customers.
"We see our customers as invited guests to a party, and we are the hosts. It's our job every day to make every important aspect of the customer experience a little bit better."
Jeff Bezos, CEO, Amazon18