Managing editor MyCustomer.com
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Customer experience management: The trends that defined 2014

15th Dec 2014
Managing editor MyCustomer.com
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Customer experience excellence is a moving target, with what constitutes an ‘excellent’ experience becoming a higher standard every year. This trend was to continue in 2014, with the CX Index by Forrester revealing that the number of poor experiences had hit an all-time low, while the gap between the best and worst companies was narrower than ever.

In 2007, the first year that Forrester conducted its CX Index, 35% of companies scored by consumers had either a ‘poor’ or ‘very poor’ score, while 0% had ‘excellent’. Fast forward to 2014, 11% of companies were rated as ‘poor’ or ‘very poor’ and 11% were rated as ‘excellent’. And in terms of score distribution, while the biggest cluster was between ‘poor’ and ‘OK’ in 2007, accounting for around two-thirds of companies, this year most brands were clustered between ‘OK’ to ‘good’, making up around 80% of organisations.

Put simply, the general standard of experience is higher than ever – which means brands need to be better than ever to stand out.

“If your customer experience is ok, that really is the equivalent of what poor was just five years earlier,” warns Michael Gazala, VP research director at Forrester. “’OK’ and ‘good’ are really table stakes. ‘OK’ is the new ‘poor’.”

He continues: “Companies have invested huge amounts of money and resources and creativity in delivering better experiences, while at the same time as consumers have gotten used to better and better experiences. This continued in 2014 and the fact that the number of poor experience is now down to 11% clearly tells us that even laggard industries like TV service providers have significantly improved the service they are offering.”

The primary factor behind this improvement is without question self-preservation, says Stephan Thun, CEO of MaritzCX Europe.

“In a world of more and more choice and less and less differentiation, customer promiscuity has increased significantly,” he notes. “As Youngme Moon, one of the world’s most compelling voices on the future of brands and a Professor at Harvard University said, “Products are no longer competing against each other; they are collapsing into each other in the minds of anyone who consumes them.’ As a result, it has become more and more important for companies to differentiate through the experiences they deliver.” 

So what have brands been doing to improve their customer experience competitiveness in 2014? Here are some of the key trends that have characterised 2014, according to the experts.

More companies are adopting an operational approach to CEM

“This year, we’ve seen broad recognition of the importance of operational customer experience management,” notes Sam Keninger, director of product marketing at Medallia. “In the operational approach, every piece of customer feedback is distributed directly to the person who owns the issue, rather to a centralised team. This way, the person who’s best qualified to resolve the customer’s problem is the one to do so.

“To keep up with this trend, many customer experience companies have start looking for ways to boost their own offerings — often through mergers and acquisitions. Traditional market research providers in particular are looking for technological solutions to help them deliver insights faster. One example is Maritz’s recent acquisition of Allegiance. These mergers have also led to some confusion in the market, though, as new companies take time to iron out the wrinkles in their offerings.”

Customer-centricity is increasingly getting exec buy-in

“Customer-centricity became a hot subject across many industries this year, and has started showing up near the top of lists of CEOs’ biggest priorities,” says Keninger. “On this year’s Conference Board survey of CEO priorities, getting closer to customers was the number one issue. Three years ago, it wasn’t even in the top five. This is significant because any initiative around customer-centricity and customer experience management is more impactful when it has executive buy-in.

“On one level, it’s getting easier to get c-level meetings on the topic of the customer experience. It’s also led to more executive adoption of customer experience management systems, and to a greater focus on CEM in general. When you have people at the top involved, CEM-related initiatives become more strategic, more multichannel, and encompass more of the organisation.”

Brands are adapting customer experience management to the omnichannel customer

“Real-time interaction with customers across omnichannel platforms has signified another key milestone for 2014,” says Graeme Collins, head of marketing EMEA, at RichRelevance. “Retailers can use information from online buying behaviour to serve customers at the point of sale based on the relevant input he or she needs. This closes the gap between online and physical shopping experiences that previously created headaches for a lot of retail brands. 

“Customers want this, too, because they can get better offers and more tailored recommendations to what they want, when they want it. By combining customer data gathered online and in store, retailers can deliver a customer experience centred around value and convenience in exchange for customer information, and enabled by new apps and technologies such as iBeacon.

“The concept of data science as a skill set within a retail environment has become more significant. Data scientists understand customer data and can leverage open source technologies to rapidly develop scalable ways to synchronise in-store data with online intelligence for better services and recommendations. This can be very disruptive at first, but if it’s executed well, it is a very rewarding experience that can generate a lot more value for the business, and for the customer too. 

Experience design coming to the fore

“The biggest trend I’ve noticed this year has been the huge focus on experience design,” suggests Matt Candy, European Leader at IBM Interactive Experience. “In 2014 we have seen successful organisations move from providing customer-centric experiences to human-centric experiences. All of these organisations have recognised that in order to respond to their customers’ constantly evolving expectations they need to provide experiences that go beyond channels, to experiences driven by insight. Experiences that exploit the convergence of the physical and digital and that are always ‘on’. Experiences that their customers love.

“Companies are moving from the old idea of being customer-centric towards becoming more customer activated. In doing so they are realising that this requires profound change, change in everything from mindset and culture to strategy and operations. In a recent IBM study 60 percent of CEOs told us that customers have a significant level of influence on every aspect of their business, not just products and services, but on their strategy as well.

“So that’s good news. It means we are now seeing more companies placing the customer at the heart of their strategy and rethinking their models of engagement. They are reviving their brands across all of their interaction points, looking beyond multi-channel to omnichannel, looking to converge their digital experiences with physical experiences and finally using insight into their customer’s behaviour to develop a personalised meaningful relationship.”

Wider changes influencing customer experience management

But not all companies have had a successful year with their customers. Indeed, the decline of Tesco was one of the main stories of 2014.

According to customer experience expert Shaun Smith, a number of market trends have been instrumental in impacting the performance of brands such as Tesco, as well as forcing other brands to re-evaluate their approach to customer experience management. Not only do these trends intersect, but Smith also believes that they will become increasingly significant in the coming years.

1. Demographic change - the polarisation in the market between baby boomers and GenY

“Both segments are growing in importance and both value different things,” notes Smith. “The Office of National Statistics estimates that almost two-thirds of retail spending will come from those aged over 55 within the next ten years. The older consumers have more money, are more demanding in terms of service and access and value a more personal experience. So out of town 'sheds' are less appealing. At the same time Gen Y consumers are spending an average of six to seven hours a day using digital devices with much of their consumption being on-line. They are much more likely to use home delivery therefore. The result is growth in on-line and branded urban convenience stores at the expense of hyper-stores.”

2. Market change

“The recession has affected people in different ways,” says Smith. “The poor have gotten poorer whilst the rich have grown richer. The result is that high-end brands like Waitrose, Burberry and Ritz-Carlton have done well as have value brands like Aldi, Primark and Premier Inn. The middle has been squeezed. Consumers are looking for value. That can mean high-end quality products and services or budget items but what they don't want are average products at average prices.”

3. Organisational purpose

Smith explains: “Surveys like Edelman and Havas Media's Meaningful Brands research have shown a year on year growth in consumers preferring to do business with brands that have values they identify with and who put 'purpose before profit'. Paradoxically, however, Havas Media's 2013 survey found that the top meaningful brands outperform the market by 120% so these are not inconsistent objectives, but it does matter what your customer believe you care most about.  

“Method, Innocent, Fairtrade, First Direct, Pret a Manger, Patagonia and others have benefitted from this 'feel good' factor whilst brands like Amazon, Starbucks, Google, Barclays, Ryanair have come in for criticism because they are perceived to be self-serving and place their profits above all else. 12 years ago we wrote a book called Uncommon Practice - people who deliver a great brand experience.

“Tesco was one of the brands we featured because its purpose of 'Earning the lifetime loyalty of customers' through its promise of 'Every Little Helps' was in the very DNA of the organisation. Over recent years, narrative has changed and it has focused on pleasing shareholders rather than customers. Its disastrous move into the US in an attempt to sustain its rapid growth, its failure to create a more compelling proposition than Aldi and Lidl in the UK and the recent investigation over its finances all point to an organisation that has lost its sense of purpose and meaning for consumers.”

With these three trends having had a major impact in the last 12 months – and with greater influence to come – some brands have been forced to rethink their strategies during 2014. For instance, Ryanair, which has in the past prided itself on its low cost and low frills model, has been forced to reappraise its strategy following a turbulent year.

However, Smith is sceptical about the authenticity of some of these strategies: “There has been the predictable 'knee-jerk' reactions from Tesco, Ryanair and Barclays that 'we need to listen to our customers and put them at the centre of everything we do' and some attempt to improve service. However, without a true sense of purpose that imbues everyone in the organisation I wonder if this will be believable or sustainable?”

And with customer experience standards rising all the time, brands that are merely paying lip service to customer-centricity could find themselves having an even harder time of it in 2015.  

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