Why creating a good customer experience strategy is so hard

Delivering a great customer experience is hard. And it’s even harder if you don’t have a well-defined customer experience (CX) strategy.

Some elements of CX strategy development receive a lot of attention and are typically done well – voice of customer research, customer journey mapping and service blueprinting, for example. But a comprehensive strategy goes much wider than this and some of the other components can be missed.  

CX strategy needs to translate business strategy into service delivery via a structured process that incorporates insights developed from both customer research and data analytics, establishes the strategic objectives and business case for investment, articulates a differentiated value proposition, describes how that proposition will be delivered by customer journey mapping, identifies the capabilities required to deliver both the desired customer experience and deliver the required returns to the business, and defines how those capabilities will be delivered across the elements of process, technology, data, people, organisation and culture. 

Rules for strategy creation

Creating strategy – any strategy – is hard. But there are three tests to apply to determine whether it is really a strategy or just an aspiration.

1. It defines what won’t be done as clearly as what will

Strategy entails deploying the resources you have to achieve your desired goals. As resources are limited, effective strategy development demands the courage (fortified by good data and insight) to say ‘No’ to doing certain things (including things that competitors may be doing) in order to do other things very well. Spreading efforts too widely limits the overall impact. So the test of a good strategy is that it prioritises sharply, outlining what won’t be done as clearly as what will be done.

Making those trade-offs is tough for anyone. The vast majority of us want to do as much as we possibly can, particularly CX professionals who are pre-disposed to do the best for customers so want to say ‘Yes’ to as much as possible. So being aware of the Yes-trap is especially important in CX strategy development.  

2.  Key assumptions are identified so they can be tracked

All strategy is assumptive. There are no facts about the future, only assumptions as to what will happen in given circumstances. Analysis is, by definition, backward facing. You need analysis to provide as firm a foundation as possible. But you also need to recognise its limitations. The process of analysing helps uncover the assumptions you are making. And calling them out – capturing them in an assumptions log - means you can monitor their validity on an ongoing basis.

Assumptions relating to strategy take two forms. Firstly there are assumptions about the external environment – things that the company has no control over – such as customer priorities, competitor actions, regulatory requirements, etc. Many companies are having to re-evaluate many of their assumptions about the external environment – particularly customer priorities – in the light of the COVID-19 pandemic and the increasing influence of the Black Lives Matter campaign.

The second set reflect assumed causality - if we do A, then B will happen. For example, if we offer superior service, we will gain new customers; if we develop a new service, we will be able to enter a new segment of the market; if we cut prices, competitors will [or will not] respond.

Both sets of assumptions always exist and making them explicit enables ongoing re-evaluation and contingency planning. One real world example of this is the pivot beloved of start-ups when they realise their initial set of assumptions were flawed. Large companies can’t pivot on a sixpence in quite the same way, but they can veer. And the earlier they realise the need to veer, the greater the likelihood of avoiding accidents.

3. It balances the needs of different stakeholders

Most businesses exist to deliver a return to shareholders. Without shareholders, there are no funds to create a business. But without customers, there is no revenue. And without employees, there is no one to look after customers. And without suppliers, it isn’t possible to make anything.

For sustained success (and I emphasise the word sustained), all these interests need to be balanced. An easy trap to fall into in strategy development is being too blinkered.

In the 1990s, when the shareholder value movement was at its most powerful, customers’ and employees’ interests were completely subverted to those of shareholders. And it resulted in businesses that could only grow profits by cutting costs. But with the rise of the internet, customers suddenly had a wider choice, increasing competition and forcing incumbent businesses to be more customer-focused and innovate better value propositions.

If anything, the balance may have swung too far in the direction of being too favourable to customers. Airbnb, WeWork and Uber – until recently all poster children in the CX world – have attracted millions of customers without developing a business model that delivers a return to shareholders. (Softbank recently downgraded its valuation of WeWork from $49 billion in early 2019 to $3bn.)

There is a value exchange with each stakeholder group and these exchanges are both complementary (having a strong value proposition for employees help the creation of a strong one for customers) and competitive (the value created by the business ecosystem needs to be shared across the different groups). Making that explicit helps to ensure that the complexity of the business system is acknowledged and the strategy is not one-eyed and over-simplistic.

Creating good CX strategy is particularly hard

There are a couple of further complications in CX strategy creation.

Firstly, there is the issue of defining CX - does it include customers’ interactions with the core products and services delivered as well as the support provided? The former relates to how well the product or service being hired performs the job-to-be-done and delivers the customers desired outcome. The latter to how well the supporting customer needs (help with requirement specification, option evaluation, product/service selection and purchase, usage support, service maintenance and upgrades, and product disposal or service discontinuation) are met.

Secondly, there is the related issue of multiple teams claiming to own the customer experience – for example, service design teams creating online experience, contact centre teams providing email or telephone support. The latter may even be called the Customer Experience Team.

I would argue that all these elements need to be incorporated into a single strategy. I would go so far as saying that if you don’t do that, you have fallen at the first hurdle. From the customer’s point of view, their experience encompasses both their use of the core product or service and their supporting interactions. They want there to be integration across all the different channels they may choose to use – web, app, chat, email, phone, etc. So if there are siloed strategies encompassing the different elements, the chances of delivering an integrated and compelling customer experience are minimal.

Who should own CX strategy?

Given the components of customer experience may reside in different organisational teams, this raises the vexed question of who should own CX strategy.

Ideally the owner of this integrated CX strategy would be the chief customer officer or the chief customer experience officer – a role reporting to CEO. But in medium-sized and smaller companies, it may only be at the CEO level that all customer-facing responsibilities come together. If this is the case, someone – perhaps the CMO – needs to co-ordinate the initiative of creating an integrated CX strategy.

If that means calling it something other than CX strategy (e.g. to avoid confusion or putting noses out of joint if there is a CX team) then do so. Call it customer strategy, call it baked beans on toast if that makes it easier – the name is not important. What is important is that you create an integrated strategy that covers all the different elements of the customer’s experience.     

Steps to creating a CX strategy

What I believe a comprehensive CX strategy should encompass is outlined in Figure 1.

Figure 1: CX Strategy Overview

Much as I would love to claim that this is all my own thinking, I should be truthful and reference the foundations it is built on.

Having worked in business strategy consulting for many years, in 2004 I joined Inforte, a customer solutions company with Michael Porter and Philip Kotler on the board – names that those who have studied strategy and marketing will very likely recognise as leading thinkers in those areas over the last 40 years. With their help Inforte developed customer strategy methodologies and tools that contributed significantly to it being the only Visionary in Gartner’s CRM quadrant at that time. Figure 1 is an updated and adapted version of one of these frameworks.

There have been many advances since the early days of CRM, when it was primarily focused on delivering returns to the business rather than improving the customer’s experience. But the steps needed to create an integrated and strategic approach to customer experience delivery have remained very similar.

I would summarise these steps as follows:

1. Review business strategy to establish context and ensure CX strategy contributes to overall business goals.
2. Define and capture or generate the insights required to support CX strategy creation.
3. Establish CX strategy priorities (across customer acquisition, retention, growth and profitability) with KPIs for each dimension, to enable the creation of a business case for investing in CX.
4. Articulate a differentiated value proposition that reflects business strategy and brand promise (if one is formally defined).
5. Design customer journeys that deliver the desired differentiation.
6. Define the capabilities required to both deliver the desired customer experience and achieve the desired business objectives.
7. Design an operating model (encompassing people, organisation, culture, process, technology and data) to deliver the desired capabilities.
8. Perform gap analysis on capabilities and operating model components, define initiatives required to address gaps and prioritise them for delivery.
9. Institute performance reporting that tracks the actual experience being delivered and how that impacts both NPS/CSAT and CX strategy KPIs.

In subsequent articles, I will describe each step in more detail so that by the end you have a comprehensive guide to CX strategy creation. If you would like to know more prior to these articles being published, please connect via LinkedIn.