Forrester's Kerry Bodine: Why Customer Experience? Why Now?

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Customer Engagement
Customer Experience
For decades companies have been promising to delight customers, while simultaneously disappointing them in nearly every channel. That tactic won't cut it anymore. Why not? We've entered a new era that Forrester calls the age of the customer--a time when focus on the customer matters more than any other strategic imperative.

For decades companies have been promising to delight customers, while simultaneously disappointing them in nearly every channel. That tactic won't cut it anymore. Why not? We've entered a new era that Forrester calls the age of the customer--a time when focus on the customer matters more than any other strategic imperative. In the age of the customer, companies find that:

- Commoditization has stripped away existing sources of differentiation. Competitive barriers of the past like manufacturing strength, distribution power, and information mastery can't save you today; one by one, each of these corporate investments has been commoditized.
- Traditional industry boundaries have dissolved. Companies in every industry find themselves competing with new types of competitors: automakers with services like Zipcar, newspapers with Google News, travel agents with Expedia, and the entire retail industry with Ebay.
- Customers have more power than ever. With online reviews, social networks, and mobile Web access, it's easy for your customers to know more about your products, services, competitors, and pricing than you--and to share their opinions of your company with their friends.

Those are the global business trends. But what specific business benefits can companies expect to gain from customer experience investments? Every firm in every industry can leverage great customer experiences to:

- Bolster brand equity. Referencing customer service conversations, Zappos.com CEO Tony Hsieh wrote in Delivering Happiness, "Our belief is that the telephone is one of the best branding devices out there." Even with conservative estimates, it's easy to make the case that the call center has influence on par with, if not greater than, that of mass advertising campaigns. And the call center is just one of many customer touchpoints where the experience influences the customer's impression of a brand.
- Garner customer loyalty. Years of Forrester data confirm the strong relationship between the quality of a firm's customer experience and loyalty measures like willingness to consider the company for another purchase, likelihood to switch providers, and likelihood to recommend. We've also found a solid connection between customer experience ratings and Net Promoter Score in multiple industries.
- Boost revenue. Even small shifts in customer loyalty can translate into billions of dollars of incremental revenue each year for firms in some industries. One example: B2B company CDW drove $230 million in incremental revenue in just one year by following up on sales leads identified through customer loyalty surveys.
- Drive down costs.Through its voice of the customer program, Fidelity Investments recently identified a problem with account authentication in its interactive voice response system. It recruited a few associates to discuss the issue, identified its root cause, and quickly launched a solution. Its estimated annual cost savings from this one fix: $4 million. Other companies count their savings in terms of higher employee retention.

The big takeaway? Companies need to start treating customer experience as a business discipline--not a bumper sticker.

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About the Author: Kerry Bodine is a vice president and principal analyst at Forrester Research serving Customer Experience professionals. She blogs at http://blogs.forrester.com/kerry_bodine and tweets at @kerrybodine

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