Why is Customer Satisfaction Falling When CX Spending is Booming? 6 Ways to Improve Linkage

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Yes, you read that headline correctly. Spending on customer experience systems is increasing but, for the last few years, customer satisfaction has been falling. Dash Research has shown that CX spending has a compound annual growth rate (CAGR) of over 6%. However, data from ACSI indicate that average customer satisfaction scores have been falling steeply since 2018. This decline precedes the pandemic, it continued through the pandemic, and it seems to be continuing after the pandemic.

This paradox does not imply that customer satisfaction is not important. Other data from ACSI show that companies with the best customer satisfaction scores have higher profits and better stock market returns. Similarly, Forbes regularly reports the commercial and financial benefits of superior customer satisfaction and experience. The issue that this paradox (i.e. rising CX spend AND falling satisfaction) highlights is that increased CX spending has stopped generating better satisfaction scores. Before 2018, CX spending was going up and satisfaction was going up. However, spending is still going up, but satisfaction is falling. That paradox is the issue that this article addresses.

I will address the spending up, satisfaction down paradox in three parts:

  • Why is CX spending increasing?
  • Why is customer satisfaction falling?
  • What can organizations do to get customer satisfaction moving in the right direction?

Why is CX spending increasing?

Business leaders know that better customer satisfaction is linked to higher profits. Some business leaders have always known this, but others are newer to the game. Over the last twenty years (and especially since the 2013 publication of Fred Reichheld’s article that led to the popular adoption of NPS), it has been generally accepted that higher levels of customer satisfaction tend to generate better business outcomes.

The knowledge that higher levels of satisfaction were likely to lead to higher profits caused more and more businesses to start taking customer experience seriously. Part of taking something seriously is measuring it. This growth in the interest in customer satisfaction was followed by the shift in nomenclature and emphasis from Customer Satisfaction to Customer Experience to CX. Over the last twenty years, most organizations have instigated some level of CX processes. This growth in the number of organizations employing CX systems is the first reason why spending on CX has grown.

Spending on CX has also been increasing because of the success of some of the larger platforms in creating and promoting larger CX installations. A growing number of installations have been subject to bloat, with additional dashboards, scopes, user licenses, and tools. For some of the platform providers, the third reason for increased spending is the result of higher prices, which are often a consequence of leveraged acquisitions and mergers.

Why is satisfaction falling?

In looking at the data to understand why average customer satisfaction is falling, it makes sense to disregard the years of the pandemic (at least for the time being). But the drop in the ACSI customer satisfaction index started falling well before the pandemic. The tipping point was in 2018, as we can see from the chart below.

The data shows that overall satisfaction increased from 1997 until 2018. Since 2018, the index has fallen back to levels comparable to 2002, i.e. we have lost twenty years of progress.

As with most phenomena, the causes of the decline in average customer satisfaction are multiple, and they don’t all point in the same direction. Here are the four key contenders.

1. Rising expectations

Rising expectations are a typical human response to services. Things that are new and delight us soon become the norm and we cease to be delighted by them. If competitors improve their offerings, then our offerings will fall behind the new expectations created by our competitors. The challenge for customer satisfaction is to keep improving the customer experience. There is no steady state for customer experience, it is either improving or (because of rising expectations) it is in decline. To put a figure to this phenomenon, Netomi found that 65% of customers reported that they have higher expectations for customer service today than they did 3-5 years ago.

2. Growth of omnichannel services

Over the last few years, there has been a massive increase in omnichannel services, especially in retailing. These changes include online, click-and-collect, mobile, in-app, and in-game. These changes were, of course, greatly accelerated by the pandemic. The customer experience for the newer channels has not always been thought through sufficiently, and it is often under-researched, so its impact on customer satisfaction can be negative. In many cases, newer channels rely on third parties, for example, online shopping relies on delivery services. In-app services rely on the phone, the carrier, the operating system, and potentially a delivery service. CX systems have not always helped the customer’s omnichannel experience, particularly when the CX program is not integrated across all the channels.

3. Automation and outsourcing

Automation and outsourcing can reduce costs and streamline internal processes, but they can negatively impact the customer experience. Not everybody wants to interact with a chatbot or seek advice from an overseas call center. In retail, automation has allowed stores to introduce self-scanning at checkouts, something that is liked by some but not by others. Where automation offers more choices, it can improve satisfaction. But if a shopper feels pushed towards a less preferred option, it can reduce satisfaction.

4. Perverse results of CX systems

CX programs are intended to improve the customer experience, but that is not always what happens. There are several ways that CX programs can be part of the problem instead of being part of the solution.

Compliance instead of experience

Too many CX systems are built around compliance. They measure whether a service is being delivered in a way that complies with the organization’s model for how the service should be delivered. This approach ignores the fact that different customers may want different experiences, it reduces the ability of the frontline staff to personalize service to match the customers, and the model of “best service” gets out of date. When that happens, the organization is using its CX program to deliver yesterday’s service to today’s customers.

Dashboard blindness

Dashboards are great, they allow people to see the data quickly and in ways they can understand. However, too many CX dashboards share two key problems: 1) showing too much data, and 2) promoting the idea of the average customer.

When I look for a good example of what a dashboard should be like, I think of the one in your car. The largest display tends to be the speed you are traveling. This is something that you need to know (to stay safe and legal) and which you can immediately regulate. Beyond the speed, there are things like the amount of fuel in your tank, the time of day, and the distance traveled. All of these are something you want to know, but not as frequently. Then there are a series of indicators that only turn on when they are required. Your oil warning only lights up when you need to attend to the oil. Your left and right indicator signs only turn on when you have indicated you are turning left or right. By comparison, a CX dashboard approach to a car might have a green light showing “Oil OK, no action needed” and a pair of messages saying “left indicator not engaged” and “right indicator not engaged.” We need dashboards to be better focused.

Another useful reminder that the car provides is that the dashboard does not tell us where to drive the car. Only when we add a satnav to the dashboard does the car tell us where to drive, but even the satnav needs us to choose a destination. CX dashboards can help you manage the customer experience, but they don’t help define what the customer experience should be.

The other dashboard problem is thinking about the average customer. If we have two service centers, each with an NPS of +20%, we might think they are providing a similar experience. However, one center might have 60% Promoters and 40% Detractors (a “love it or hate it” service), while the other might have 20% Promoters, 80% Neutral, and 0% Detractors (a safe but not special service). These two centers have the same NPS score, but they are very different in terms of the customer experience they are generating.

Fixing problems instead of removing them

Most CX programs generate “red alerts” — a message that a customer has had a bad experience and that the organization should seek to fix the problem. This is, of course, a good thing. However, it is only a good thing if this process feeds into strategic thinking about how to re-engineer the process to remove the problem. We know that only a small percentage of customers fill in a CX survey, so we are only fixing the problems for those who filled in the survey and who had a problem.

We need to fix the problem for everybody, and that means linking CX to business process re-engineering. By having red alerts and fixing problems when they occur and not having a thematic process, CX systems can allow a customer experience process with faults to stay in place.

Perverse incentives

The problem of perverse incentives in CX programs has been widely talked about. When staff knows their bonus or their future employment is linked to a CX score, for example, NPS, they will seek to improve the score. The most direct way to improve a CX score is often not by improving the service but by pressuring the customer to give a good score. This can increase the score but leads to a worse customer experience (since customers do not like being pressured to give a 9 or 10).

Data silos

Many CX programs operate in silos. These CX programs are not linked to the wider organization, they report to operational teams but not to those designing the future of the organization. Similarly, other data sets, such as insight communities and qual research, are often not integrated into the CX information, meaning that everybody has a partial picture and nobody has the whole picture.

What can organizations do to get customer satisfaction moving in the right direction?

The world has entered a period of high inflation for the first time in forty years. Increasing prices are likely to create more customer dissatisfaction. Because of inflation, we are going to see many people in financial difficulties in what is called a cost-of-living crisis. This cost-of-living crisis is likely to affect consumers in several ways that are likely to negatively impact customer experience. You can see a review of inflation and CX here.

Here are six things you can do to restore the link between CX and improved customer satisfaction:

  • Move away from your CX program being compliance-based and towards it being an input into business process re-engineering.
  • Avoid your CX program stagnating, don’t focus on yesterday’s problems and yesterday’s metrics. Review your program every 18 months to see what to add, what to change, and what to drop.
  • Decouple your CX system from bonuses, especially for frontline staff, to reduce the perverse incentives.
  • Rethink your dashboards to reduce the number of items displayed and to increase the ability of users to drill into details.
  • Stop thinking about the average customer, start personalizing your offer, and match your CX program to personalization.
  • Link the CX program to other data sets and to the insights process, in a two-way exchange of information.
  • Think about how inflation is going to affect your customers and whether your current CX program is going to help you help your customers.

7 COMMENTS

  1. Actually, this is not that great a surprise, at least to me. About 15 years ago, I wrote a CustomerThink post – https://customerthink.com/no_satisfaction_understand_behavior/ – about the inability of customer satisfaction scores to consistently connect with actual customer behavior. Satisfaction is largely tactical, passive, and attitudinal, representing what customers say about their experiences rather than representing the behavior itself, and the emotions behind the behavior. In sum, like NPS and CES, satisfaction as measured by ACSI has never been an accurate gauge of behavior; and today’s marketplace complexities have only decreased satisfaction’s utility and value as a North Star metric.

  2. Hi Michael, I think that is a valid point, but a slightly different one. You are challenging whether NPS or CES are good North Stars, and I tend to agree with you. However, the point I am highlighting is that spending more and more money on improving these scores has stopped delivering the results they used to deliver. Even the people who believe in CES and NPS as key metrics need to stop and think about why their programs are not delivering what they used to deliver.

  3. Hi Gautam, again a good point, but not the one I am making. In the past CX spend correlated with CX and CSAT scores, but in recent years, even though CX has soared, the correlation has been broken. This means, IMHO, people need to work out why before they spend even more on CX programs.

  4. Hi Ray, it’s probably a good sign that CX spending continues, as more companies are joining the pursuit of improved customer relationships. In general, I agree with your list of 6 recommendations.

    I’ve never felt that there was a valid correlation between CX spending (especially on tech) and CX ratings. That’s due to my belief that CX efforts are generally on the wrong trajectory. Instead of trying to get customers to do certain things, it’s better to get your non-customer-facing people to do different things, to prevent issues for customers.

    Instead of thinking of CX as a program (or programs), I’ve found it best to think of it as a ratio of delivering to your brand promise. This is what we did when I led CX company-wide during my 11 years at semiconductor equipment maker, Applied Materials.

    Like you, I’m deeply concerned by numerous recent studies that show a drop in customer experience. Economic pressures are likely to perpetuate that trend, as value is being sacrificed now in many ways. When I saw the Forrester CX Index this summer, I gave a lot of thought to their index criteria, and suggested different ways to interpret those criteria for far better CX performance and financial gains. Here it is, for readers who would like to consider shifting gears to rise above these lukewarm (and worse) norms: Rethinking Customer Experience Strategy: Forrester’s 2022 CX Index Dropped to 2020 Performance.

  5. Thanks Lynn, I particularly liked this phrase in your article “If strong performance in likely to recommend was as powerful as people believed in the 2010s, then quantifying CX ROI should NOT be the top challenge today, especially after a dozen years of heavy investment in asking the likely to recommend question.”

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