Customer Experience (CX) 2.0 is failing, here is what a more successful CX 3.0 looks like
It is an increasingly acknowledged reality in the business world: companies excelling in Customer Experience (CX) often boast superior business results. This correlation is not coincidental. Studies, including one from Forrester, have consistently shown that CX leaders outperform CX laggards in terms of stock performance and revenue growth. Yet, despite this clear link, many senior leaders are rethinking their approach to CX.
The Disconnect and the Downscaling
As we step into 2024, a startling trend is emerging. Senior leaders, not seeing the anticipated benefits from Voice of the Customer (VOC) programs and CX management efforts, are slashing budgets and downsizing teams. Many CX leaders find themselves on the chopping block as part of these cost-cutting efforts.
At this time, it does not appear that these leaders are being replaced, neither are there alternative approaches to evaluating and addressing CX improvement needs being implemented. So, does this mean these companies are good and do not need to address CX issues? Hardly.
The Fundamental Flaw in the Current CX Approach
The problem is not the objective of improving CX itself, there remains a significant opportunity for companies to increase growth, improve profitability, and earn long term loyalty through improved experiences. The issue is that many companies’ approach to CX is all wrong.
Current practices in CX, while well-intentioned, are missing the mark. The focus has been on asking questions like “What is my score?” or “Who is at risk of churning?” While saving customers from churning is an important activity, it is reactive. The long list of root cause issues, that if addressed would increase the score, reduce the number of customers that become at risk of churning, and improve outcomes, often go unaddressed by the organization, falling prey to other priorities that various functional leaders have committed to and are being held accountable for.
Redefining the Questions for CX 3.0
The evolution to CX 3.0 demands a shift in perspective – from a problem-solving approach to one of value-creation for the business. Whether speaking of acquisition, expansion, retention, or profitability, customer experience improvement is critical to achieving success.
Questions you can ask relative to the role of CX in driving business outcomes could include:
Acquisition: Which customers and prospects hold the greatest potential value, and how can we tap into that potential? What makes the company’s value proposition and experience particularly valuable to targeted customers?
Expansion: Which customers have the highest potential to increase their spend? What is happening in the experience that keeps them from expanding their relationship? What would make the experience more valuable?
Retention: What are the events or factors in the customers’ journey that put relationships at risk? Which CX improvements will reduce customer churn and increase loyalty? How much is a point of churn reduction worth?
Profitability: Is it a priority to reduce costs, operate more efficiently, and increase gross profit? It is for many organizations! What high-cost processes that also deliver sub-optimal CX can be addressed impacting retention and loyalty, as well as profitability?
Instead of competing with various functional priorities, help functional leaders understand how their existing priorities can be better addressed through a focus on customer experience. Tailor your questions based on the direct purview of the role. The graphic below is a strawman for that correlation:
It is About Achieving Value Alignment
A VOC listening program is by definition, listening to what the customer needs, wants, and values. Similarly, a customer journey map seeks to understand what the customer needs, how they engage with a product or service, what their unmet needs are, and what the objective or value is that they are seeking to achieve. CX management efforts often fall short because they do not evaluate how the list of customer value opportunities that arise from VOC programs and journey maps translate into value for the business.
CX leaders must be able to answer the question of the value (or cost) to the business of either taking action or not taking action on an identified customer experience opportunity.
Once a CX leader can connect what they do to value delivered to the business, that is the ROI of their efforts, the likelihood of CX leaders being dismissed in cost-cutting measures becomes a lot less likely.
Six Steps to Transform Your CX Approach:
Integrate CX with Business Strategy at the Functional Level: The CX leader should be meeting with every functional leader during strategic planning to understand how CX management activities can help them achieve their objectives.
Functional Accountability for Specific CX Actions: CEOs should shift away from including CX scores in scorecards and instead include targeted customer outcomes that are part of each functional team’s strategic objectives.
Leverage Advanced Analytics: Undertake advanced analyses that predict lifetime value and value potential, as well as likelihood to churn. Then begin using these metrics to guide how the business operates.
Redefine Your CX Metrics: Shift from traditional satisfaction metrics to those directly tied to business value like impact on customer lifetime value, relationship growth, customer retention, and profitability.
Every Insight Should Be Prioritized: CX improvement opportunities coming from customer listening activities, including from the contact center, are all evaluated and prioritized for expected impact on customer outcomes and potential ROI.
Track the ROI of Your Program: Work with Finance leaders to agree on a method for measuring financial impact of CX programs. Track ROI continually and include it in management reports consistently.
Many company leaders have talked a good game about wanting to be customer centric, but few actually achieve it. A CX 3.0 approach will more directly connect customer value with business value, leading to the elusive customer centricity many have sought. This paradigm shift will ensure that every CX improvement effort directly contributes to your organization's financial health and growth, and that every effort to improve your organization’s financial growth considers how a CX centered approach can help them achieve their objectives efficiently.
It is time for businesses to finally learn how to use Customer Experience more effectively as a strategic differentiator and an engine for superior growth rates.