In this post, I study what loyalty-leading companies do differently than loyalty-lagging companies in their customer experience management (CEM) efforts. The research helps identify best practices that companies can adopt in their CEM efforts to increase customer loyalty.
Customer satisfaction is important for business success. Satisfied customers recommend your brand to their friends, stay with your longer and expand their buying relationship with you over time. In fact, researchers found that companies that have customers who are more satisfied with the customer experience (CX) have a better 6-year stock performance compared to companies that have customers who are less satisfied with their experience (see Figure 1).
But what makes CX leaders different than CX laggards? Do they adopt different practices in their formal CX improvement efforts? Formally known as customer experience management (CEM), these CX improvement efforts vary across companies. They differ on a variety of things like the level of program support at the executive level, the metrics used and the way customer data are analyzed, too name a few. In this study, I’ll examine how CEM programs differ for loyalty leading companies and loyalty lagging companies.
Business Activities in Customer Experience Management Programs
All CEM programs are not the same. Companies have the option of adopting certain CEM-related activities. Some companies might adopt the practice of sharing customer feedback results company-wide, other companies might limit sharing to the executive team. Some companies might use customer feedback to set company strategy while other companies might rely strictly on financial metrics to guide their strategy. The sum of the adopted activities essentially defines the company’s CEM program. These various activities can be grouped into six areas or components (see Figure 2):
- Strategy addresses how companies incorporate CEM into their long-term plans/vision/mission to help achieve its objectives and goals
- Governance describes the formal policy around the CEM program: Rules, Roles, Requests
- Business Process Integration involves embedding CEM processes/data into other business operations
- Method addresses the means by which customer feedback is collected and what gets measured
- Reporting addresses analysis, synthesis and dissemination of customer feedback
- Research is concerned with how companies provide additional customer insight by conducting deep dive research using different types of customer data
The CEM Best Practices Survey
I developed the CEM best practices survey as part of a larger study (see results of this prior research here). The survey asks respondents to indicate the extent to which their company adopts 30 different CX activities across the six CEM program components (e.g., Strategy/Governance: Use customer feedback for executive compensation; Method: Employ web to collect customer feedback).
Also, the survey included questions asking respondents to estimate their company’s industry loyalty ranking (used to segment the loyalty leaders from laggards), information about themselves (e.g., job role, program knowledge) and their company (e.g.,headquarters location, size, and type).
As part of my consultative work, I offer the CEM survey as a free service to provide companies a high-level evaluation of their current CX program (you can see and take survey here: bit.ly/cxpsurvey). I have shared the link to the survey to the CX community through a variety of methods, including blog posts, social media networks and presentations. I continually collect data from these sources.
A total of 135 CX professionals completed the self-evaluation over the past two years. The following analyses are based on this sample of respondents. All responses are anonymous (confidential if they include their name).
While these data represent a self-selected sample, I believe that they are still useful in identifying best practices in CEM programs. While the overall sample may not be representative, the data do allow us to examine segment differences. Specifically, while I have little confidence that the data provide a good picture of the state of CX programs across the entire universe of companies, I can use the data to study the differences between loyalty leaders and laggards. It is this comparison that will reveal best practices.
Respondents were asked to indicate in what country their company is headquartered. Most companies were headquartered in North America (50%), followed by EMEA (34%), Asia (12%) and LATAM (4%). Respondents were also asked about their role in relation to the customer feedback program. The sample consisted of Senior Executives (18%), Directors (17%), Managers (29%) and individual contributors (14%). The remaining where either outside consultants/employees.
Figure 3 contains additional information about the sample of respondents. The sample consists of primarily small to medium sized companies from a wide variety of industries. Also, the sample is made up of primarily B2B companies (B2B or B2B/B2C – 69%) that have multiple locations (74%).
A total of 76 respondents provided their company’s loyalty ranking. As you can see in Figure 4, loyalty rankings range from the lowest percentile ranking to the highest percentile ranking. For purposes of this study, I defined loyalty lagging companies as those companies that have loyalty rankings at or below the 50th percentile. I defined loyalty leading companies as those companies that have loyalty rankings at or above the 80th percentile. I felt that using these criteria helped me optimize the ability to detect significant differences between these two groups if these differences really exist.
Adoption Rates of CEM Activities Differ for Leaders and Laggards
Next, I looked at adoption rates of the 30 CEM activities between loyalty leaders and loyalty laggards. In the first analysis, I wanted a high-level look at how loyalty leaders differ from loyalty laggards. I looked at the adoption rates for each CEM component. The results appear in Figure 5. Loyalty leading companies tended to adopt CEM activities at a higher rate compared to loyalty lagging companies for each CEM component.
The differences in adoption rates between leaders and laggards was quite large for each CEM component. Aggregating cross all CEM activities, more loyalty leaders adopted CEM activities (72% adoption rate) compared to loyalty laggards (48% adoption rate). Looking at each component, results showed that CEM activities related to Strategy/Governance were adopted the most by loyalty leaders (80%). CEM activities related to Integration and Research were the least adopted by loyalty leaders (67%). Loyalty laggards, compared to loyalty leaders, tended to show lower adoption rates across all CEM components (lowest were Integration and Research; highest in Method).
Next, I take a deeper look at each CEM component.
Figure 6 contains the results of the comparisons of loyalty leaders and laggards in adoption rates of specific CEM activities related to Strategy and Governance. As you can see in the figure, more loyalty leaders tend to use customer feedback for executive compensation (89% vs 42%) and view customer feedback as important as financial measures (71% vs 35%) compared to loyalty lagging companies.
Differences for other strategic and governance activities were less apparent, but in the expected direction; loyalty leaders use customer feedback at the highest level of the company (e.g., in strategic visions, employee compensation, executive is champion of program) compared to loyalty laggards.
Business Process Integration
Figure 7 contains the results of the comparisons of loyalty leaders and laggards in adoption rates of CEM activities related to integrating customer feedback into business processes. Specifically, results show that more loyalty leading companies adopt CEM activities around integration compared to loyalty lagging companies. The biggest difference was found in the use of social media; more loyalty leaders tend to use social media or community boards to resolve customer complaints (73%) compared to loyalty laggards (40%).
Differences for other integration activities were less smaller, but in the expected direction, showing that loyalty leaders integrate customer feedback into current processes, systems and executive dashboards and share information about the CEM program to the entire company.
Next, I examined the difference between leaders and laggards on their adoption of CEM activities related to the collection and measurement process of customer feedback (See Figure 8). Results show that more loyalty leading companies pursue evidence of the measurement quality of metrics (81%) compared to loyalty lagging companies (54%).
Differences for other measurement-related activities were also in the expected direction, including using different survey methods, measuring different types of customer loyalty and monitoring social media sites regarding products/services.
No differences between leaders and laggards were seen for a couple of CEM activities: use of web surveys and online brand communities. Both loyalty leaders (78%) and loyalty laggards (88%) use web surveys to collect customer feedback. Also, having your own online brand community does not appear to be related to customer loyalty.
Figure 9 contains the adoption rates for CEM activities related to analysis and reporting of customer feedback. Results show that more loyalty leaders benchmark customer feedback results (80%) and use web-based reporting tools (68%) compared to loyalty laggards (40% and 35%, respectively).
A few other reporting-related CEM activities also showed large (but not statistically significant) differences between leaders and laggards. Loyalty leaders tend to adopt the use of social media to determine customer sentiment (71%) and share results throughout the company (79%) compared to loyalty laggards (44% and 56%, respectively).
Next, I looked at differences between loyalty leaders and laggards on their adoption of different research practices using customer feedback. As seen in Figure 10, more loyalty leaders integrate customer feedback with other types of company metrics to gain deeper insight. Specifically, 78% of loyalty leaders link customer feedback to operational metrics while only 33% of loyalty laggards do the same.
Additionally, the use of existing customer information does not seem to make a difference between leaders and laggards as both groups show moderate adoption of this activity (74% vs 61%). Over half of loyalty leaders (59%) regularly conduct applied research using customer feedback data while less than half of loyalty laggards (36%) do regular applied research using customer feedback data.
Roadblocks to Increasing Customer Loyalty
The survey included a question about roadblocks that prevents companies from increasing customer loyalty. The results appear in Figure 11. Nearly two-thirds of respondents indicated that the most common roadblock they experience is the lack of integration of customer feedback into business operations. The remaining roadblocks were far less frequent. The next most common roadblocks were about the cost associated with and resources needed to run the customer feedback program (i.e., “Too expensive / Not enough resources” – 36%) and the lack of timely and actionable customer feedback data (i.e., “Customer feedback not timely/actionable” – 27%). The remaining items were mentioned by less than 25% of the respondents, including “Lack of top management support” and “Customer feedback program does not provide customer insights.”
Results of the current study showed that loyalty leading companies use customer feedback data differently than loyalty lagging companies. The following are suggestions on how companies can get the most from their CEM efforts.
1. Incorporate customer feedback in your strategy and goals. A big part of setting company strategy and goals is determining where to allocate company resources to improve customer loyalty. Loyalty leaders can use customer feedback (via customer relationship surveys) to identify key drivers of customer loyalty. Key drivers represent those business areas that are both important to customers and where your performance suffers.
2. Compensate executives using customer metrics and include them in their dashboards. To know where you’re going, it helps if you know where you are now. Executive dashboards provide the key, high-level metrics that measure the health of the company and tracks its progress. Including CX metrics in executive dashboards helps ensure that the customer is always part of the agenda in executive meetings. Additionally, compensating executives using customer metrics helps direct their attention to efforts to improve customer metrics.
3. Use social media or community boards to resolve customer complaints. Social media represents yet another channel for customers to communicate and interact with you. There are many ways companies can use social media to drive their business, from understanding the consumer sentiment of your brand to using social media to engage your social influencers. In addition to using social media to target marketing offers to followers and fans, the results of this study showed that using social media for customer support purposes can improve customer loyalty.
4. Evaluate customer metrics to ensure they are reliable, valid and useful. The quality of your CX metrics matter. They are used in executive dashboards and reports. More importantly, CX metrics are used in all subsequent analytic efforts. Using the right CX metrics in your analysis will optimize your efforts in finding the right customer insights. Using wrong or poorly-constructed CX measures and your are not likely to uncover anything useful. Follow these four rules to ensure your CX metrics are reliable, valid and useful . 1) Define CX metrics clearly. 2) Know precisely how the CX metric is calculated. 3) Provide measurement properties of CX metrics. 4) CX metric needs to predict valuable outcomes.
5. Benchmark your results. Keiningham et al. (2011) argue that focusing on your absolute improvements in customer experience is not enough to drive business growth. You also need to improve your performance relative to your competitors. He and his colleagues found, in fact, that a company’s ranking (against the competition) was strongly related to share of wallet of their customers. They found that top-ranked companies received greater share of wallet of their customers compared to bottom-ranked companies. A way to improve customer loyalty, then, is to increase your standing relative to your competition. To improve your ranking, you need to understand two pieces of information: 1) how your customers rank you relative to competitors they have used and 2) the reasons behind your ranking. Here is one way to benchmark your performance using feedback from your current customers.
6. Integrate customer feedback with business processes/operational metrics. Loyalty leaders integrate customer feedback into different business processes , from executive dashboards to CRM systems, helping facilitate communication the right customer information to the right employee at the right time. Having easy access to customer information allows employees at every level of the company understand their customers’ needs in order to deliver a better experience. Integration of customer feedback with business processes is the first step of a truer integration. Rather than simply reporting customer metrics side by side with other business metrics, companies can integrate/link the underlying data that support different business processes. By linking the disparate data silos, you can find statistical relationships among a wider array of metrics, helping you to uncover deeper insights that are simply not possible by looking at each data silo separately. The total is truly greater than the sum of its parts. It is because of these linkages that loyalty leaders are able to find deeper customer insights. Read how Oracle links their customer feedback data to operational metrics.
Customer satisfaction and loyalty drive business growth. Companies who have customers who are satisfied and loyal outperform companies whose customers are less satisfied and loyal. What CEM practices separate the leaders from the laggards? Achieving the status of loyalty leaders requires the adoption of specific CEM activities to help you use customer feedback data more effectively. The current research provides some specific ways companies can improve how they use customer feedback to improve the customer experience.