Insights
Customer Experience
Meeting new consumer needs and expectations is critical to business success. Here is a proven formula for elevating the customer experience.
The first step to a successful customer experience transformation is to agree on a clear definition of the type of experience you want to provide. When companies set out to define their customer experience goal, they often fall into one or both of two traps: Either the goal is generic and not closely tied to the company's purpose, or it's unclear how the goal will create value that can be measured and tracked. Falling into either of these traps leads to CX transformation programs that lack clarity and coherence.
A good CX goal fulfills the company's purpose and brand promise. In line with their corporate goals, Nike strives for inspiring experiences, Starbucks for experiences that encourage, and BMW for the ultimate driving experience. Costco does not seek to replicate the experiences its customers have at high-end retailers, but instead offers a no-frills in-store experience that reflects its low-cost brand promise.
Companies then translate their goals into expected business value by defining the specific changes in customer behavior they expect to see. For example, if a bank wants to deepen its customer relationships, this focus might be reflected in the decision to measure success by the number of customers who choose the bank for all major banking transactions. This focus on customer behavior completely changes the conversation in the executive suite. Executives start talking about the customers, not the financials. They prioritize the experiences that lead to expected customer behavior, even if customer needs change over time.
Many of the best companies use quantitative research and statistical analysis to base their decisions on facts about what customers value so they can prioritize the experiences that matter most. The most advanced companies use advanced analytics to simulate the expected impact of their potential investments so they can build compelling business cases for those investments.
While executives often successfully develop comprehensive plans for CX transformation, many fall into the trap of implementing business-as-usual programs to make the necessary changes. The most common mistake is to divide the different elements of the program among different functions. This leads to communication problems, responsibility issues, and accountability issues that defeat even the simplest transformation efforts.
The customer experience initiatives of the companies that are most successful look and feel very different. These companies are assembling agile, cross-functional teams that truly take ownership of their projects, have deep technology expertise, and foster a culture of design thinking and continuous improvement. Before the pandemic, these teams could be found problem-solving around white boards in an open room with glass walls, background music, and constant hustle and bustle. One innovative bank adopted a "culture of red shoes" to illustrate its speed of innovation and agility, and the CEO traded in his suit shoes for red sneakers when he visited the design labs. In today's world, these teams have seamlessly transitioned to collaboration platforms to drive continuous cross-functional innovation. For companies truly committed to a CX culture, these are not superficial embellishments. They reflect a significant investment in recruiting and nurturing agile teams with deep expertise in experience design, developing cutting-edge omnichannel platforms and technologies, and re-imagining experiences, products, and services that best deliver on the brand promise.
To define customer personas and understand customer needs, cross-functional agile teams use design thinking and advanced analytics toolkits to rapidly conduct quantitative and ethnographic research. They conduct co-creation workshops to develop innovative concepts and prototypes that address pain points. They use advanced analytics to identify and prioritize meaningful performance metrics, such as shorter wait times, to quantify the true financial impact of changes in customer behavior that translate into increased contract renewals, for example, and to track progress. Once new products and services are developed, these agile teams ensure that they are scaled across the business, integrated into the technology platform, and continuously tested and refined across different segments and geographies.
These design-driven measures are not nice-to-have elements. In our 2018 study on the business value of design, we found that user-centric companies that perform best outperform their competitors in terms of revenue by nearly two-to-one. Crucially, they also iterate quickly when developing new experiences and ensure they prototype and test them with consumers to increase their chances of success.
Another critical element of all successful CX transformation programs is a central team that combines ideation tools and methodologies, continuously conducts both generative and evaluative customer research, and brings together cross-functional experts with specific expertise, such as scrum masters, omnichannel technology architects, designers, and researchers. This central team ensures that the culture of technology-enabled innovation becomes a distinctive competitive advantage that is sustained over time and across all regions.
Leaders who have successfully implemented new experiences for their clients support change by building new capabilities. Four of these we believe are most critical to success.
From the executive level to the frontline staff, employees need to be confident that they have the skills and tools they need to deliver the best possible experience to customers. Leading companies are developing academies that combine digital courses, live workshops, and ongoing stimulation to help develop new skills. Each learning journey is tailored to a specific role within the organization. Frontline employees, for example, gain practical tips on how to put themselves in their customers' shoes and show empathy when interacting with them. CX managers and innovation teams gain skills in redesigning customer experiences and mobilizing cross-functional teams. Executives receive tips on how to support, accelerate, and celebrate customer centricity in the organization - for example, by integrating design thinking into the early stages of the strategic planning process.
To deliver exceptional omnichannel customer experiences, companies need a technology stack that spans the entire enterprise. This is often a digital platform built on microservices and APIs to deliver a variety of services to customers quickly and flexibly, an omnichannel contact center platform with caller ID, chat, video chat, and email management, and a single system that integrates the platforms together. For example, a health insurer looking to redesign its customer enrollment process pursued two parallel workflows: one that redesigned and simplified the entire enrollment process, and another that rebuilt the underlying technology. The two teams worked together to modernize the omnichannel platform and technology, which allowed them to transform a series of disparate, paper-based, channel-specific processes into a seamless, digital omnichannel experience. In just six months, the company tripled the number of online applications, achieved a 90 percent straight-through processing rate, and reduced back-office effort by 80 percent and front-office effort by 70 percent.
Innovation teams are only effective if they have the freedom to make decisions. This means implementing agile decision-making processes and assigning formal decision-making rights to leaders on the team. These new processes and decision rights often require some internal negotiation, but lead to exceptional results. For example, a B2B financial services company that committed to a new agile operating model increased its customer satisfaction from under 20 to over 50 in two years by increasing on-time responses to customer inquiries by 90 percent, reducing the backlog of inquiries by 40 percent, and saving 600 employee hours per month.
Leading companies today are using predictive analytics, machine learning and Big Data to overcome the well-known limitations of customer feedback, which often provides only an incomplete and inaccurate picture of the actual customer experience. At the very least, companies need management systems with sophisticated feedback loops that communicate to employees what behaviors yield the best results and guide innovation teams on where to focus their efforts. The best tools allow companies to accurately predict each customer's current satisfaction and future spending based on their experience. One large travel company built a feature that scored each customer's experience based on data such as location, loyalty member history, and recent travel experiences. Machine learning was then used to predict customer satisfaction for each customer based on their individual experiences. With this new feature, the company was able to dramatically improve customer follow-up immediately after poor service experiences, increase satisfaction among the most dissatisfied customers by 800 percent, and decrease intent to churn by 59 percent.
The greatest and most lasting impact on the customer experience comes from bringing these three building blocks together. Here is how one European utility did just that. Faced with rising customer expectations, strong competitive dynamics, evolving market and regulatory pressures, and internal complexity, the leadership team responded with a comprehensive customer experience redesign. This included redesigning the market approach and operating model to achieve a sustainable leadership position in the market.
To define its goals and the value expected from the CX transformation, the team quickly articulated clear business objectives. By quantifying and prioritizing each of the CX "value pools" in the B2C business-acquisition, service, customer engagement, and process digitization-it developed a transformation roadmap for double-digit improvement in earnings before interest and taxes (EBIT) over three years.
For the second building block, business transformation, the leadership team formed a cross-functional team of "CX ambassadors" from ten countries and a core team of designers and CX experts. They met two days a week in a central location and worked as a "CX factory" to consolidate customer insights, harmonize definitions of customer journeys, and translate value pools and customer pain points into tangible designs and prototypes for optimal customer journeys. Their analysis showed that most high-impact CX levers were applicable across all countries, despite differences in each market. The CX Factory team created a fully functional microsite for movers that went live within four weeks in the first pilot country, and then expanded to other countries based on proven financial impact: increased customer loyalty and reduced service costs as fewer customers used support during their move.
These changes were only possible because the underlying capabilities were transformed and key enablers were put in place - the third building block. The company applied agile principles not only in the CX factory, but also across all geographic business units - rapidly iterating and generating ideas, prototyping, and adapting Minimum Viable Products (MVPs) based on customer feedback. To scale these capabilities, the company conducted virtual training on key skills such as agility, design thinking, and problem solving. It codified best practices into a virtual library that can be used by any team member in any country. Finally, it illustrated the dramatic impact of this new way of working through videos, messaging, and tools distributed throughout the company.
The redesigned journeys reduced the utility's face-to-face contact costs by more than 20 percent, customer churn by nearly 15 percent, and significantly increased customer and employee satisfaction. In fact, one-third of the full impact potential of the three-year program was realized within the first 12 months.
Companies looking to become more customer-centric can use one of the following quick-start methods:
Companies that aspire to become more customer-centric can use one of the following quick-start methods.
Leading a customer experience (CX) transformation can create a lot of anxiety. Many executives are hesitant to even start because they are overwhelmed by the many challenges that change brings to virtually every silo of the organization. But this hesitation poses real risks to the business. Recent changes in consumer behavior and expectations brought about by COVID -19 are forcing businesses to change the way they connect with and serve their customers. Those that fail to adapt to the new normal will quickly fall behind. History clearly shows the value of investing in customer experience during a downturn. During the last recession, companies that placed a high priority on customer experience delivered three times the returns to shareholders as companies that did not. The good news is that there is now a proven formula for transforming the customer experience. It includes specific steps made up of three core building blocks: a clearly defined goal, an agile transformation approach, and thoughtful use of new capabilities, especially advanced analytics (see figure). By combining all three building blocks, companies can gain a competitive advantage in their industry. In the ten years we have helped more than 900 companies develop and implement enterprise-wide customer experience programs, we have seen this approach deliver compelling results: 15 to 20 percent higher revenue rates, 20 to 50 percent lower service costs, and 10 to 20 percent higher customer satisfaction.