Should the Focus Be on Customers’ Experience or Loyalty?

This article was originally written as a column for the newsletter, Creating Loyalty.

We at Creating Loyalty prefer the term, “customer loyalty” over “customer experience,” but the two concepts are close cousins. Those familiar with the customer loyalty management (CLM) model recognize the large impact that customer experience variables tend to have on loyalty.

But there’s more to loyalty and vendor choice than just customer experience. For one, customers consider your value relative to competitive offerings. They also hold an image of your company brands and perhaps of your product. This makes the concept of loyalty more robust than experience, because loyalty embodies how people feel about the brand and its value, in addition to what they have experienced.

However, this takes nothing away from the importance of customer experience. After becoming customers, people decide to repurchase largely based on their experience. Buyers initially choose a firm largely based on image, brand promises and price competitiveness, but their experience usually takes precedence over image and value in determining repeat purchase. This is especially true in business-to-business but often applies to consumer behavior, as well.

CEM vs. CRM

Because experience is critical to manage, you might ask, “What exactly is customer experience management or CEM?” In May 2003, Walker Information defined CEM as “applying technology and the storage of customer information to improve the customer’s service experiences with the company”. But then, how is CEM any different than a CRM system? The answer is that, while CRM systems collect customer purchase and profile data for marketing and cross-selling, CEM data is needed more to improve service processes. A CEM example would be using records on line-wait time in bank branches to increase staffing or other resources to reduce the lunch hour wait time.

Unfortunately, CEM systems often leave out the most critical elements of customer experience: their perceptions or feedback. CEM should not be about just the software, or the clever warehousing of internal data. A viable CEM system must tell what customers say they have experienced in addition to other observations of those experiences. Taking the above example, how else do you really know when a line wait is too long, unless customers say it is?

Best practices in CEM

Fortunately, many CEM programs today include tracking customer perceptions of the important touch-points in the customer life cycle. In fact, we have revised our definition of CEM to be, “applying customer perceptions, technology and the storage of customer information to improve customers’ service experiences and their ultimate loyalty to the company.” This definition, itself, implies several features that a best practices CEM effort must have, including being:

1. Integrated. The different inputs about customer experiences—customer perceptions, service activities, purchase behavior, etc.—are entered in a central database, so they can be analyzed and linked.
   
   
2. Comprehensive. The inputs span all the key touch-points in the customer life cycle. This includes the various channels the customer may encounter such as the phone center, email, the web site and a visit to the branch office, as well as stages, such as pre-sale, purchase, new customer, middle customer and repurchase.
   
   
3. Loyalty-linked. There should be modeling to prove which transactions carry the most weight on loyalty for the sake of setting priorities, as well as proving how good or bad experiences can shift customer loyalty, at least temporarily.
   
   
4. Frequency-managed. Put controls in place to prevent the over-surveying of individual customer contacts (balanced with the need to be comprehensive).
   
   
5. Diagnostic and performance-measurable. Transaction surveys are quite short but still include enough questions to not only track operational performance but also diagnose how to make it better.
   
   
6. Accessible. The information is available in real time, especially for use by account and functional teams.
   
   
7. Catalyzed. The information is being used to make improvements by both the functional and account teams, with accountability to management for doing so.
   
   

The last point is, of course, the most important one. Customer experience management deserves to have the last part of its name changed from “management” to “measurement,” unless customer experiences are enhanced. By enhancing the customer experience, we help secure the true loyalty of customers.

© 2005 Creating Loyalty