There have been cracks in the CX story. And now there is another article by a CX proponent, Charles Bennett of the Next Ten Years, Great Customer Experience does not always mean great business performance.
He goes on to say:
“The theory says customer experience is proportional to revenue. At least that’s what “best practice” thinking has taught us. The better the customer experience the better the business result.
Really? Problem! This is not always true. There is new thinking emerging that differentiates customer outcomes from customer experience. It adds a new dimension which helps companies differentiate from their competitors.
It also explains why some great customer experience companies fall into decline and why some dreadful customer experience companies are massively profitable.”
He examples Spirit Airlines, which has terrible CX, and people say “never again” after traveling it. They rank at the bottom of the American Customer Satisfaction Index, the lowest Net Promoter Score and gain the greatest number of customer complaints, by far! And yet they are profitable, and people buy and travel them. (You could ask if NPS relates to business results!)
Spirit Airlines is amongst the most profitable airline in the world with an operating margin of 23% in 2016 . You can’t deliver that sort of business performance unless customers are buying, and buying they certainly are. There must be another customer dynamic going on.
Another example is Subway, ranked 8th in the Temkin Customer Experience Survey of 300 odd US companies. Yet their revenue figures fell 4.3% in 2015 for the second consecutive year. It opened 911 new restaurants but closed 877.
Bennett goes onto add “You would expect that great CX would mean a higher market share and a higher ROI for your company.”
Very often this is not the case. It took years before companies learnt that Customer Satisfaction did not lead to business results. Poor satisfaction did not always mean lower market share, and great satisfaction did not necessarily mean higher market share.
Customer Value Thinking
All this started at AT&T. In the mid ‘80s they got 95% CSat scores. The Board of Directors was delighted and gave out bonuses. 3 months later they lost 6 points of market share and had to fire 20000 employees. Customer Chief Ray Kordupleski was perplexed. After much analysis, he reached the conclusion that CSat did not correlate to business results, and he came up with the concept of Customer Value (Benefits – Cost), and that Customer Value was always to be measured against competition. Brad Gale, then at Strategic Planning Institute promoted the concept of Value.
Look at this yourself. You have examples of when you were upset with your airline or your favourite restaurant and even your wife. Did you leave them. It takes a lot more to do so. What are the factors that could lead to your leaving?
Continued aggravation over a period of time. Getting a better option (and you find this better option will create greater value for you).
Take my case. I owned a Honda car and liked it. Yet during re-purchase I chose the Suzuki competitor, because it gave me better value, better features at a competitive price. I bought the Suzuki because of its enhanced value over the Honda. In my next purchase, I went back to buying a Honda, even though I loved the Suzuki. At that point in time, the Honda seemed to create better value for me.
Customer Experience Replaced Customer Satisfaction
When companies started to find satisfaction was not good enough, a new term was used to replace satisfaction and it was called experience.
The experience with this transaction vs. the satisfaction with this transaction.
It allowed the industry to re-invent itself into CX. Measurement of CX is the same as with satisfaction. It is not to say that CX and CSat are not important. They are. But they form a component of the value you perceive. We do not expect great experience or emotions at a gas station as when buying a BMW.
We all have to think this through, and move ahead. Increase CX but also the value you provide. Let the cracks not break your business results and you.
So what can you do? The easy way is to do a real Customer Value creation desk analysis of yourself (your product/service) and your competitors. This forces you to look outside your company at the market, your competitors and their customers. Why do people buy from them and others buy from you.
The problem with this desk analysis is
- It is biased by your thinking
- You do not have real data from Customers and your competitors Customers. You may not know what Customers are saying about you and competitors’ Customers saying about them. You probably will have to guess and you could be far off from the truth.
- You have to outside in think (rather than inside out think)
Customer Value is Based on Competitive Reality
So this was the easy way. The more difficult way is to really hear and capture the Customer Voice in a Value study, where you measure the scores on the benefits (and the breakup of the benefits) and on the cost (which is price and non-price terms such as ease of doing business, price justification etc.). You then can measure the Value (Benefits –Cost) you are creating versus competition.
The competitions’ data is derived by asking the competitors’ customers the same questions you ask your customers (Most people do not want to do this extra step and spend the extra money. They lose out because they cannot compare themselves versus competitors). Short cuts will give you incomplete data, and you will wonder why you do not come out a winner. This is part of the problem of only relying on CX or on NPS.
Here is a simple Value attribute tree:
The data you collect will tell you how important benefits are and how important costs are. You may surprise yourself by finding people consider you costlier even though you believe your price is reasonable. Or that people think price is very important and you do not think of yourself as a commodity player (which the data says you really are!)
CX is one part of the benefits, and you may find it is relatively important or not at all important in the Value study. So, if you did an analysis of budget airlines (the more finely you segment your study, the better off you are), you may find CX is not truly important, and that price and other terms, convenience and airports served, and luggage rules are more important.
Use CX Wisely
Give the experience where it is required. Reduce the need for an experience when it isn’t: I just want things to work (the flight leaves on time, there is no hassle with my carryon luggage and so on). The moment things go wrong (the airline says your luggage is too big to carry on) or flights are delayed, or you have to get a refund, you start to get poor experience; an experience you never wanted, and you will say Never Again, but you will continue to travel that airline again.
Remember your Customers’ quest for Value and a good experience as you sell to and service them, and you will be more successful.