Managing Customer Experience

WHAT IS CUSTOMER EXPERIENCE?

Customer experience is the cognitive and affective outcome of the customer’s exposure to, or
interaction with, a company’s people, processes, technologies, products, services and other outputs.

Customer experience is the cognitive and emotional outcome of a customer's exposure to or

interaction with a company's products, services, people, processes, and technologies. It is influenced
by the customer's perception of value and quality, and it can affect the customer's future buying and
word-of-mouth intentions. Many companies are now implementing customer experience (CX)
strategies in order to improve customer loyalty and reduce negative word-of-mouth. These
strategies often focus on improving interactions with customers through the use of people,
processes, and technologies, which are also core elements of customer relationship management
(CRM) strategies. CX can be managed and improved through various methods, such as gathering
customer feedback, analyzing customer data, and implementing customer journey mapping.

Service marketing

Services management experts have identified a number of special attributes that

characterize services. Services are performances or acts that are:

Intangible

Services are intangible, meaning they cannot be seen, tasted, or sensed in other ways before
consumption. This makes it difficult for customers to judge the quality of a service before they have
tried it.

Inseparable

Services are also inseparable, meaning they are produced at the same time and place they
are consumed. This means that customers are often involved in co-producing the service, which
makes it harder for companies to control the quality of the service.
Heterogeneous

Services are also heterogeneous, meaning they cannot be robotically reproduced to exact
specifications and tolerances like goods can. This makes it difficult for companies to guarantee the
content and quality of a service encounter.

Perishable

Finally, services are perishable, meaning they cannot be held in inventory for sale at a later
time like goods can. This presents a challenge for marketers in terms of matching supply and
demand.

The planned customer experiences

The planned customer experience refers to the way in which companies design and
influence the cognitive, affective, behavioral and social responses of customers through their
products, services and interactions. This may involve enhancing the customer experience by adding
value or differentiating it from competitors, or it may involve selling the customer experience as the
core product. The goal is to carefully design the elements that influence the customer's responses in
order to create a positive and memorable experience.

THE IKEA SHOPPING EXPERIENCE

IKEA is a home furnishings retailer that offers a distinctive in-store

shopping experience. Upon entering a store, customers are given
various tools and materials to assist with their shopping, such as
pencils, paper, tape measures, and store layout guides. They are then
directed on a one-way route through the store that allows them to see
the merchandise displayed as if in use. Customers can try out the
merchandise and make note of items they want to purchase, which
they can either collect from the self-serve area or have a staff member
arrange to have available at the furniture pick-up point. Most IKEA
furniture is flat-packed and can be taken home immediately, or the
company can arrange for home delivery. The store also has restaurants
and accepts various forms of payment. IKEA aims to provide a carefully
planned and satisfactory shopping experience that is periodically
reviewed and improved.

Total quality management

Total Quality Management (TQM) is a business management approach that aims to improve the
quality of products and processes through systematic feedback from stakeholders, including
customers. TQM originally focused on reducing defects and costs in manufacturing, but has also
been applied to the service sector. The SERVQUAL model, developed by Parasuraman, Zeithaml and
Berry, identifies five dimensions of service quality: reliability, assurance, tangibles, empathy and
responsiveness. Research has shown that perceptions of service quality can affect customer
retention and business performance.
 Service quality is important in understanding customer experience because it plays a
significant role in the overall customer experience. Poor service quality can negatively impact the
entire experience, while good service quality can enhance it.

The SERVQUAL model identifies five dimensions of service quality: reliability, assurance,
tangibles, empathy and responsiveness. The "SERVQUAL plus" approach expands upon these
dimensions to also consider emotions, peer-to-peer interactions, the customer's use of the product,
the relationship between the supplier and buyer, and brand communication and image.

The EXQ model also recognizes that customer experience is a holistic concept that
encompasses various stages of the customer lifecycle and is influenced by both elements within a
company's control (such as the marketing mix and service quality) and those outside of its control
(such as the customer's objectives and the social context).

CUSTOMER EXPERIENCE CONCEPTS

There are a number of core concepts that are associated with customer experience manage-
ment. These include touchpoints, moments of truth and customer engagement.

Touchpoints

Touchpoints are the points of interaction between a customer and a company, including
physical and virtual interactions through products, services, communications, people, processes,
technologies, and places. These can include websites, social media, retail stores, service centers,
advertising, and more. The variety and number of touchpoints can vary widely depending on the
industry and specific company, and they are increasing in number with the rise of social media.
Touchpoints can be found throughout the customer journey, such as during admission to a hospital,
during treatment, and during discharge.

Moment of truth (MOT)

A moment of truth (MOT) is a specific interaction or encounter between a customer and a

company or its products/services that can influence the customer's overall impression of the
company. These interactions, which occur at touchpoints such as customer service centers, can
either positively or negatively impact the customer's evaluation of the company. MOTs can be
particularly impactful if they do not meet the customer's expectations.

Customer engagement

Customer engagement refers to a strong sense of identification and commitment a customer

has towards a brand or organization, based on their experiences and interactions with the firm. It
involves cognitive, emotional, behavioral, and social dimensions and is considered to be more
important than traditional measures of satisfaction. New metrics are needed to measure customer
engagement effectively.

Customer engagement can be measured through cognitive, emotional, behavioral, and social
metrics.

• Cognitive measures include the customer's knowledge of the company's brand values and
sustainability awards.
• Emotional measures include the customer's preference for the company's offerings and
excitement about new product launches.
• Behavioral measures include website visits and newsletter clicks.
• Social measures include the use of recommendation programs and engagement on social
media platforms such as Facebook and Twitter.

Customer engagement is the level of involvement, interaction, intimacy, and influence that a
customer has with a brand over time. It is characterized by a sense of confidence, integrity, pride,
delight, or passion in the brand. Involvement is the presence of the customer at a touchpoint,
interaction is the actions of the customer at the touchpoint, intimacy is the emotional sentiment of
the customer towards the touchpoint experience, and influence is the advocacy behaviors of the
customer. Companies can measure customer engagement by developing a set of relevant indicators
for the four dimensions of involvement, interaction, intimacy, and influence.
HOW TO MANAGE CUSTOMER EXPERIENCE

Companies can use a number of methods for improving their insight into customer
experience, including mystery shopping, experience mapping, customer ethnography, and
participant and non-participant observation.

Mystery shopping

Mystery shopping is a research method in which paid shoppers report on their customer
experience with a company or its competitors. It is commonly used in B2C industries such as retail,
banking, and hospitality, and can also be used in B2B industries like insurance. The aim of mystery
shopping is to assess the performance of a company or its employees.

Experience mapping

Experience mapping is a process used to understand, chart, and improve the customer
experience at various touchpoints. It involves gathering feedback from customers about their
experiences at these touchpoints through methods such as focus groups, interviews, and surveys.
The goal is to identify the gap between the actual and desired experience, and then to implement
strategies to close that gap through improvements to people and processes. These strategies may
include things like better training and rewards for employees or investment in technology to
improve processes. Experience mapping is commonly used in the hospitality industry, but can also
be applied in other sectors.

Customer ethnography

Ethnographic methods involve observing and participating in people's daily lives over a
prolonged period of time in order to gain a better understanding of the socio-cultural context of
customer experience. This approach can reveal the emotional and social significance of even
mundane goods and allow companies to understand how customers appropriate the values of their
brands and create their own product value. Ethnography can be conducted by researchers or by
customers themselves using mobile apps that allow them to record their experiences.
Participant observation

Participant observation is a research method in which the researcher actively takes part in
the activities and experiences of the group or community being studied. In the context of customer
experience, it involves companies sending their employees to actively participate in and observe
customer interactions at various touchpoints, such as in front-line customer service roles. This helps
the company gain a better understanding of the customer experience and ensures that executives
who may be removed from customer interactions have a firsthand understanding of what it is like to
be a customer.

Non-participant observation is a method used by companies to have their senior managers

observe customer interactions at customer touchpoints in order to gain a better understanding of
customer experience. This can be particularly useful when the primary customer touchpoint is a call
or contact center. The Royal Bank of Scotland combines experience mapping with customer
satisfaction, service quality, and cost data to improve customer experience and profitability.

REINVENTING CUSTOMER EXPERIENCE AT ROYAL BANK OF SCOTLAND

The Royal Bank of Scotland (RBS) implemented a program to improve the

customer experience for its retail customers by mapping, evaluating, and
redesigning key services. This involved analyzing the cost, performance,
and customer perception of each service, and using this data to improve
the services that were most important to customers, where the bank
performed poorly, or where customer satisfaction was low. The program
also aimed to reduce costs by eliminating unnecessary services that did
not matter much to customers. This program resulted in cost savings,
improved effectiveness, and increased customer satisfaction, and is now
being rolled out in other RBS divisions.

WHAT DISTINGUISHES CUSTOMER EXPERIENCE MANAGEMENT FROM CUSTOMER RELATIONSHIP

MANAGEMENT?

Customer experience management (CXM) and customer relationship management (CRM)

• both aim to improve customer retention, satisfaction, and lifetime value.

• Both strategies involve integrating customer touchpoints, channels, and communication to
provide coherence and identity, and both require customer-focused behaviors from
customer-facing employees.
• Both also involve segmentation, targeting, and creating segment-specific offers or
experiences.

However, CXM focuses specifically on designing, implementing, and improving customer

experiences at organizational touchpoints, while CRM may include CXM but also involves other
strategies for managing customer relationships.

There may be some overlap in language and concepts between the two strategies, but
overall CRM strategies tend to focus on enhancing CX, while CXM strategies are often implemented
using CRM tools and technologies.
CRM’s influence on CX

The implementation of a CRM strategy, and the deployment of CRM technologies, can have
a significant impact on customer experience.

Customer experience management aims to design, implement, and improve customer

experiences at organizational touchpoints, with the goal of retaining and satisfying customers. CRM
(customer relationship management) and CXM (customer experience management) often go hand in
hand and have similar goals, such as customer retention and satisfaction. Both CRM and CXM
strategies often focus on integrating customer touchpoints and communication, motivating
employees to provide better customer experience, and segmenting and targeting customer groups.
However, not every company with a well-executed CX strategy uses the CRM toolkit and some, like
Apple, do not differentiate their product offer or experience for different customers.

Operational CRM is the application of technology in the customer-facing functions of sales,

marketing, and service that aims to improve the customer experience by providing better
recognition of customers, better understanding of their needs, more accurate order fulfillment and
billing, more relevant and timely communications, and more responsive and reliable service.
However, it is often motivated by efficiency measures rather than a focus on improving customer
experience, and its impact on customer experience may not always be positive, particularly for more
conservative customers. Some benefits of operational CRM, such as reduced transaction costs and
increased data security and privacy, may not be immediately apparent to customers.

Analytical CRM involves using customer data to improve customer experiences through
personalized, relevant communications and offers. It can also be used to help customers in
unexpected ways, such as alerting them to approaching credit limits or offering more suitable
telephone contracts. However, it has historically been used to "strip-mine" customers rather than
truly understand and meet their needs. Instead, it is suggested that it is better to nurture customers
as renewable resources.

HOW CRM SOFTWARE APPLICATIONS INFLUENCE CUSTOMER EXPERIENCE

CRM software applications can influence customer experience in both positive and negative
ways. When implemented effectively, CRM technologies can help improve customer recognition,
understanding of customer needs, and communication, leading to a more positive customer
experience. However, when implemented poorly, CRM technologies can result in customer
frustration and resentment, leading to a negative customer experience. It is important for
companies to carefully consider how CRM technologies will impact customer experience during
planning and implementation, and to monitor customer response after implementation.

CRM technology can greatly improve the customer experience by providing sales reps with
access to current, searchable product databases and allowing them to quickly and easily prepare and
send quotes, obtain electronic signatures, and send order confirmations to customers. This can lead
to more successful interactions and more efficient order fulfillment processes.

Features of CRM applications that improve customer experience

CRM software applications that are easy to use and navigate, and that respond quickly, can
improve the customer experience. Performance, usability, flexibility, and scalability are important
features to consider when choosing a CRM solution to ensure a positive customer experience.
Usability

Usability refers to how easy it is for a user to navigate and use a CRM application. High
usability CRM applications are easy to use, require minimal user training, and are responsive. Older
CRM applications often used menu systems and function keys for navigation, while newer web-style
interfaces use hyperlinks and drill-downs for a more intuitive user experience. In high volume call
centers, basic web-style technologies may not be sufficient and must be supplemented with
scripting or applets to achieve the necessary level of interactivity and performance.

Flexibility

An application's flexibility determines how many alternatives are available to the user at any
given time. These alternatives are often implemented through hyperlinks, buttons or screen tabs. A
highly flexible application will have many such links, and will not require specific processes to be
followed. The customer does not want to be told 'I can't do B until I've done A'.

High performance

The performance of a CRM system is often determined by its weakest link. A CRM
application running on an extremely fast network will still be slow if the database is overloaded.
Even the best software application will be unresponsive if network performance, database
performance or server performance are substandard.

A CRM application will appear slow if the user has to wait for an automatic email to be
created and sent via the email interface. Remote users such as field service engineers will perceive
the system as slow if they have to wait more than a few minutes for their daily synchronization to
their laptop.
Scalability

Acceptable performance with 100 call-centre users may become inadequate once the
customers are online and hitting the website, or field sales reps start synchronizing across all
territories at the same time. CRM applications should be evaluated based on proven numbers of
users, and types of users.

High performance CRM systems require investment to keep up with changing customer
expectations. It is most important that the CRM application be constantly monitored against
predefined performance targets. This is particularly the case in high turnaround areas where the
customer is involved, such as the call centre and website.