Anchoring Digital Transformation Programs on Improved Customer Experience

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In today’s digital era, when customers wield unprecedented control over their choices, the implications are clear for organizations embarking on a digital transformation journey. If the experiences customers demand in their products and services aren’t delivered, organizations can expect customers to vote with their feet.

Success in any transformative digital journey lies not in a technology-centric mindset, but in one that places customers at the center. Companies must reimagine their business models and leverage disruptive technologies to deliver engagement and experiences that align with what customers seek.

Providing customers with an exceptional experience is the key to unlocking customer loyalty, outshining competitors, enhancing brand reputation, and reaping the rewards of valuable customer insights. A recent study demonstrated the success of this customer-centric approach, with 84 percent of organizations that focus on improving customer experiences reporting increased revenue, and 79 percent attesting to significant cost savings. Deepening relationships with existing customers partly explain these findings, as acquiring new customers can cost as much as five times more than retaining existing ones, and loyal customers spend 67 percent more than new ones.

Acquiring new customers heavily depends on this loyalty as a whopping 85 percent of customers read online reviews before making a purchase, underscoring the imperative nature of building a robust brand to acquire new customers.

A few trends are emerging in the era of customer centricity. For starters, as companies pursue an enhanced customer experience, the focus on building and maintaining a comprehensive dataset about customers becomes paramount. This 360-degree view facilitates a profound understanding of customer preferences and past interactions, enabling organizations to personalize interactions, recommend relevant products, and proactively address customer issues.

Netflix exemplifies this approach, leveraging machine learning algorithms to drive customer engagement. More than 80 percent of the shows people watch on Netflix are discovered through the platform’s recommendation engine. It even dynamically customizes the thumbnails of its shows for each user to generate higher click-through rates.

Another trend has organizations expanding their supply chain to maintain complete control over the customer experience. Tesla stands out in this regard, handling everything from production to sales in-house, and achieving unparalleled customer loyalty with a staggering 80 percent of customers choosing Tesla for their next car.

Lastly, active customer engagement and the creation of a loyal community are key to driving lasting financial performance and Net Promoter Score (NPS). Nike, for example, has forged ahead by establishing membership programs, such as Nike Training Club and Nike Run Club, that grant customers access to exclusive benefits and build a robust community through social media channels. Through strategic partnerships and a direct-to-consumer approach, Nike boasts about 160 million active members, contributing significantly to its fiscal success.

How do organization achieve success in their customer-centric approaches?

A critical aspect of success is to build a companywide culture committed to customer centricity. This culture fosters a continuous feedback loop, encouraging companies to listen and adapt to customer needs. To spearhead and drive this culture, many organizations are establishing the role of Chief Customer Officer, providing a senior-level sponsor to champion and execute this customer-centric strategy.

Organizations are increasingly establishing a dedicated Customer Experience (CX) function. These teams employ ethnographic research methodologies, delving deep into customers’ needs, expectations, and behaviors. It focuses on outside-in analysis, gaining insights that guide organizations in aligning their transformation efforts with customer expectations.

Two prominent tools that CX teams leverage for this research are Customer Personas and Customer Journeys. Customer personas are archetypal representations of existing customer subsets who share similar goals and motivations. They offer valuable insight into what customers want and how they engage. A compelling example is Lululemon, where Founder Chip Wilson anchored the company’s strategy on a persona named Ocean. Ocean, a 32-year-old professional woman making $100,000 a year, recently engaged, a condo owner, a traveler, fashion-forward, and committed to a daily hour-and-a-half workout, inspired the organization’s merchandise design. This innovative approach has had a transformative effect on the fashion industry, establishing Lululemon as a pioneer in the emerging athleisure category.

Customer journeys represent the comprehensive series of interactions a customer has with a product or service. These journeys encompass details related to the customer persona — including touchpoints, needs, emotional responses, and pain points. Employing this analysis technique allows organizations to pinpoint “moments that matter,” or critical junctures in the customer journey that wield a disproportionate impact on the overall customer experience. Understanding these interactions is paramount for addressing issues and capitalizing on opportunities to enhance customer experiences.

Regrettably, only 25 percent of CX professionals report that their companies’ CX programs effectively enhance customer experience. One significant obstacle is the failure to pinpoint the root causes of poor CX.

Identifying root causes is the first step. However, coordinating change across organizational silos also poses a significant challenge. By linking points in the Customer Journey to specific processes, organizations can precisely identify root causes and facilitate the implementation of necessary changes. Moreover, establishing the needed cultural shift involves creating a direct connection between employees’ day-to-day tasks and their impact on the customer. This connection is critical for fostering accountability and driving success.

To deliver on this, organizations must establish a process capability, typically through a Process Center of Excellence (COE), to build and maintain this information for long-term value. While this necessitates investment and leadership commitment, the enduring returns in the form of a differentiated customer experience make it a worthwhile, if not critical, investment.

Michael Schank
Michael Schank is Founder and Managing Director at Process Inventory Advisors LLC. He has over 25 years of experience as a management consultant in the financial services industry, advising clients on technology, process, risk, and large-scale business and digital transformations. His new book, Digital Transformation Success: Achieving Alignment and Delivering Results with the Process Inventory Framework (Apress, Dec. 24, 2023), shares how to drive a new level of operating efficiency and agility necessary to thrive in this digital era. Learn more at processinventory.com.

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