Customer Experience, The New Business Imperative

Dr J.C. de Villiers, Director, WithNova Experience Management. 28 August 2019

In the past few years the field of Customer Experience (CX) has truly exploded! And quite rightly so, particularly in difficult economic times when you cannot afford to lose customers as new ones are difficult to acquire.

It really makes total sense that satisfying your customers’ needs builds loyalty, and that creates improved business results. So CX is a concept whose time has come. But is it really something new?

Most large organizations now employ a Customer Experience Executive, and business consultants small and large all sell themselves as experts in the field. A few years ago, there were only a few niche consultancies focusing on this space such as Beyond in the UK and the Temkin Group, Smith+co and Experience Engineering in the USA. But now all the large IT vendors have joined the new gold rush, with SAP acquiring the Qualtrics survey platform for a vast amount, and buying the dashboarding company Tableau for an even more staggering amount. Customer Experience conferences is another global phenomenon capitalizing on this trend and now even the largest business consultancies such as the McKinsey Group have developed a strong focus on Customer Experience consulting. As a result of the increased importance of the role of the customer experience manager, employees in this role globally are increasingly organizing themselves to “professionalize” the role. This is also driven by the large IT companies starting CX training academies to help develop recruits for their software platforms. But is Customer Experience really something new, and why the heavy focus and investment in this area?

The late Prof. Peter Doyle from the London Business School suggested years ago already that in order to be successful, a company should be customer centric, by having a market orientation. He defined a market orientation in the following way: “A business achieves success by organizing itself to meet the needs of target customers more effectively than its competitors”. This seems to be so self evident but totally true. Most modern innovations such as electric cars, car hailing platforms such as Uber, Amazon’s plethora of most convenient services and branchless banks are examples of competitors who are meeting customer needs better than the incumbent providers. Meeting customer needs more effectively is directly related to the functional customer experience.

But where does customer experience management fit into the organization and what is its history? We have to trace the origin of customer experience back to the service marketing and relationship marketing movements of the 1980s and 1990s and the marketing function in the organization. It is this function that is responsible for customer identification, acquisition, loyalty and growth. Philip Kotler and Kevin Lane Keller, two of the most respected gurus in the fields of marketing and strategic brand management defined the task of marketing management in the organization as: “the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value”. Philip Kotler then goes on to explain that these three functions of marketing; creating, communicating and delivering value, are actually three separate dissiplines in marketing, and that the purpose of marketing can be summarized in what he calls the Strategic Marketing Mantra which he abbreviates as "CCDVTP". These letters stand for C: create, C: communicate, and D: deliver. V: the value, T: to the target market, P: at a profit. These are the three basic activities required for any successful firm to succeed, and these activities or dissiplines are as follows: Creating value is Product Management. Communicate value is the job of Brand Management, and Deliver value is the job of Customer management.

As can be deduced from the above, CX can therefore be seen as a subset of customer management which is the dissipline that ensures optimum delivery of the value proposition and to ensure client loyalty. Broadly speaking Customer Experience (CX) is how a customer perceives the product, brand and customer service through all the interactions at all touchpoints across the customer life cycle. But obviously all three of these dissiplines need to be in total alignment. The value proposition needs to be communicated in terms of brand values and promises, which then need to be delivered to clients. All three of these activities need to be 100% congruent. Most importantly, the customer experience should be congruent with the brand promise.

Although the marketing function normally manages product development and marketing communication, it is not only the marketing function that delivers the experience at organizational touchpoints, but it involves all the employees of the organization. Therefore, the delivery part of marketing is executed by all employees, and it is a cross functional responsibility typically combining marketing, human resources, operations and information technology. To further understand the way customer experience fits into the organization we can also go back to the well-known Peter Drucker, seen by many as the father of modern management. Drucker said: “marketing is so simple it is basically thought of as the whole enterprise seen from the customer's point of view”. The customer cannot see the departments and silo's inside the company. What the customer experiences at all interactions over time will stick and will form attitudes that will result in differing level of customer loyalty.

This idea was later augmented by Pine and Gilmore, who were the pioneers of the idea of the experience economy. They said it is claimed that the aim of marketing is to make selling superfluous. But according to them, the aim of experience is to make marketing superfluous! The idea therefore is that if your customers receive such incredibly satisfying experiences, they would become so loyal that they would conduct your marketing for you through word of mouth and they would become advocates and active promoters of the business. This idea is also encapsulated in the construct of the customer ladder of loyalty, where customers start out as as “suspects” on the lowest rung, then “prospects”, then move up the ladder to become “customers”, “clients”, then “supporters”, and finally “advocates” and “partners” in the business. The idea of the ladder of customer loyalty is for the marketer to actively move his/her customers up the ladder of loyalty until they reach the highest rung, where they are true advocates for the business.

This idea is also encapsulated in another statement made by Peter Drucker who proposed that the purpose of a business is to create and keep a customer. The profit you make is simply the reward you get for how well you do that. If we look at one of the most successful businesses on the planet today and its incredible rise over the last twenty, we can just look at Jeff Bezos and his basic business philosophy which is an example of Drucker’s statement. He has stated over the years many times in his letters to shareholders, as well as in videos that are available on YouTube, that customer obsession is his number one priority, and that Amazon would not have existed otherwise. He states that the rules that he's followed over the years is firstly to be totally obsessed on customers, secondly to constantly innovate and invent on behalf of customers, and thirdly to think long-term, as according to him in order to be customer obsessed you must think long term.

Customer centricity is not negotiable. According to Manning and Bodine from Forrester Research, we are living in the age of the customer. Over time we have moved from the age of manufacturing through the age of distribution through the age of information, and we are now in the age of the customer. In this age customers are empowered through digital media and changes in the political environment, where empowered buyers demand a much higher customer focus. Companies that succeed in this era of the customer put the customer first and is obsessed with the customer. There are many examples of such companies including Southwest Airlines,, USAA Insurance, Ritz Carlton Hotels, Zappos, and many more. But what are the roots of the move towards customer experience in the age of the customer? If we read the excellent book of Yuval Noah Harari, Sapiens, a Brief History of Humankind, it adds an interesting perspective on these developments. He spells out the evolution of human thought over the ages, and emphasizes how we moved from religious society to secular society in the West, where the ideology of liberalism sanctifies the subjective feelings of individuals. It views these feelings as the supreme source of authority. It is interesting to note that in the religious age, if you can call it that, the supreme source of authority was God. But he suggests that in the age of humanism, humans are elevated to the level of gods, and that what is good and what is bad, what is beautiful and what's ugly, what ought to be and what ought not to be according to him, are all determined by what each one of us feels. So therefore, we have moved into an age where experience is the ultimate aim, and it follows that experience should be the focus of every organization in order to be successful.

So, is Customer Experience something new? In a way yes, due to the fact that it forces us to think outside-in from the customer’s point of view, and combined with Design Thinking methodologies it can help to easily serve the customer better. There is a major shift taking place, but this shift is built on the collective knowledge and experience of almost 40 years of the marketing dissipline. Harvard Business School only recently announced that they are now offering an executive development program called “Transforming Customer Experiences”. This program was previously known as “Achieving Breakthrough Service”. Coming back to Prof. Peter Doyle. Companies that do not meet the needs of target customers more effectively than competitors, will simply disappear over time. And customers increasingly have experiential needs, with functional and emotional dimensions topping the list. How customer centric are you? Do you really know what the experiential needs of you customers are and how you measure up against that? If not, you’d better start working on it!