Customer Experience Management: Tips from Big Business

By Allan Pulga

Contemporary retail has evolved. Customers are not only buying products anymore – they’re buying an experience. And whether that means purchasing a car (a driving “experience”) or a cellphone (a communicative, high-tech experience), the buyer is shopping for much more than just a benign, literal item.

Jeneanne Rae, co-founder of Peer Insight research and consulting firm said, in a recent BusinessWeek.com column, “Customer experience is one of today’s great frontiers for innovation… we are still at the dawn of the Experience Age.”

She predicts that customer experience will determine the winners and losers in almost every industry imaginable.

Rae offers the following reasons why customer experience matters:

1. Raving fans. “Superior customer experiences are still so novel that when we encounter one, we tend to talk about it to others,” she said. “Ask anyone who bought a Mini Cooper lately and you’ll see what I mean. This kind of viral phenomenon creates positive buzz in the marketplace, and is often even more powerful as a tool to generate revenues than the most expensive traditional marketing programs.”

2. Loyalty. “A stable revenue base of customers makes it easier to increase both the top and bottom lines: 80 per cent of Starbucks’ revenues come from customers who visit their stores an average of 18 times a month.”

3. Premium pricing. “Customers will gladly pay more for an experience that is not only functionally but also emotionally rewarding. Companies that are skilled at unlocking emotional issues, then creating economic value propositions that win with consumers, avoid commoditization.”

4. Differentiation. “The degree of choice in most goods and services is – well – bewildering, to say the least. Standing out from the crowd assures a better likelihood of getting picked in the first place; sustained positive customer experiences reduce the possibility of churn afterwards.”

After studying dozens of Customer Experience exemplars, Rae identified a number of integrated business disciplines she calls “engines” for delivering fantastic experiences.

“These examples show the starting place for great customer experiences is – the customer.”

• Moments of Truth

“Great customer experiences start with the ‘moments of truth,’ touch points in a customer’s journey with his product or service environment” she explained. Starwood Hotels (owner of the “W” and Westin chains) focused its in-room customer experience on the moment a guest walks into his hotel room and sees the bed. Starwood decided to feature clean and sumptuous white bed linens. “It probably didn’t make a lot of operational and financial sense, but the loyalty and buzz factors paid for it in spades,” said Rae. And other hotels are copying the idea today.

• Brand Values

Well-articulated brand values serve as the customer experience navigation point. Pointing to the success of Whole Foods, Rae said its in-store experience highlights the company’s many brand values: “sell the highest-quality foods, satisfy and delight customers, support communities, promote environmental stewardship, and so on.” All of these elements add up to an extremely satisfying experience for loyal Whole Foods customers.

• Technology and People

Companies need to reorganize their human resource practices to drive better, more personalized experiences for customers, said Rae. “Studies have shown the highest return on operational investments comes from fostering repeat customers – making training and incentives for front-line staff of critical importance.” She says companies like Ritz-Carlton, Progressive Insurance and Harrah’s Entertainment have deployed technology to keep customers happy and coming back.

• Value Creation

TIVO – a machine that allows you to watch the TV you want, when you want it – has succeeded at convincing its faithful users that its experience is indispensable. “This phenomenon is at work when people say, ‘TIVO has changed my life!’” noted Rae. “We all need and want more control… Customers care about what they want when they want it, and they turn to the easiest place to get it.”

• Not Just Products

Rae applauded Apple’s dominance in the MP3 market, largely due to the company’s success in creating “the iPod ecosystem” including hardware, software, and the iTunes site – with songs, video and accessories – everything you need in one place, all exclusively Apple. “This was highly integrated, systems thinking at work, which is uncommon in most large companies,” said Rae.