Forrester's Paul Hagen: Differentiating on Customer Experience

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Customer Engagement
Customer Experience
With the majority of companies focused on improving customer experience, how can a company expect to differentiate on it? Because there remains a tremendous amount of lip service and intellectual dishonesty about what it takes.

Michael Porter famously wrote that companies differentiate themselves by performing a unique set of activities that are different than their competitors, or by performing the same activities differently.

Here are some numbers: 86 percent of companies say customer experience is a top strategic priority for 2011; 76 percent seek to differentiate based on customer experience; 46 percent have a company-wide program for improving customer experience currently in place and another 30 percent are actively considering it; and 52 percent have a voice of the customer program in place, with close to 30 percent more actively considering it. With the majority of companies focused on improving customer experience, how can a company expect to differentiate on it? Because there remains a tremendous amount of lip service and intellectual dishonesty about what it takes. Let me give a few examples:

- Friendly agents game the numbers. Although not able to answer the two questions that I had, a super friendly phone agent at a major telecommunications firm ended the conversation by asking: "We aim to not only meet your expectations, but to exceed them. Have I done that today?" From the tone of the agent's voice and the question asked, it's clear that someone at the company is thinking about customer experience. However, the gaming of the question indicates that the company's culture has a long way to go to actually improve the experience beyond the superficialities.

- Our aim is to be #1 in revenue. Despite having a centralized customer experience effort already three years in the making, one company I recently worked with is still formulating a customer experience strategy. But wait, there's more! The firm's newly formulated company strategy focuses on achieving the top spot in global revenues a decade from now. Imagine that customer experience leader trying to focus the culture on customers' experiences with that as the most prominent company driver?

- Customer-centric most often means putting the customer in the center of our convoluted operations. Working outside-in (rather than inside-out) is a fundamental mind shift that challenges even the best of organizations. Most firms focus primarily on internal business processes, efficiencies, stakeholders, and measures -- not on things important to customers. Even software platforms like CRM, that are supposed to support company attempts to be customer-centric, often don't account for customer processes, customer perceptions, and customer efficiency. As a result, marketing uses customer data better to improve lead generation and service has tools to more quickly deal with patrons, but customers still have to navigate the foreign silos that make up the world of organizational structure.

The good news for leaders is that there is plenty of room for differentiation. There are many ways to provide differentiating experiences that don't all have to be like Zappos or Ritz Carleton, but that make a difference in the eyes of your customers. Differentiate your companies by performing the customer experience activities differently. Understand the magnitude change of an outside-in approach, be intellectually honest in seeking to truly understand (and not game) customer's perceptions of the experience, and align operations to better deliver value to customers.

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About the Author: Paul Hagen is a Principal Analyst at Forrester Research serving Customer Experience professionals. He blogs at http://blogs.forrester.com/paul_hagen

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