In 2023, 60% of brands said that by investing in customer interactions, they were able to improve their ability to meet customers’ changing needs. This shows that since the pandemic, global adoption of digital solutions that support development of a customer experience has accelerated by three years (source: Statista). In fact, the trend had already taken hold before the crisis caused by Covid-19, but today, two years later, it has taken on even greater strategic importance.
Before going any further, let’s try to provide some clarity: what is customer experience?
What is customer experience and how it works
The customer experience encompasses all the online interactions that a customer establishes with a brand during his or her purchase journey. While most of these interactions still take place through a company’s website or through apps, the use of other digital channels, such as social media, email and instant messaging chats (also bots and conversational AI), are also growing rapidly and are continually redefining and enriching the way companies can connect with their audiences.
The customer experience is the overall experience by customers during their online journeys, an experience that can take many forms: product research to fully understand the product’s features or to make comparisons, generic forum browsing to obtain comments and reviews, requesting information from self-service portals, using mobile apps for suggestions, and assistance for using a product.
Moreover, the customer experience is the set of perceptions, or even the ultimate perception that a customer experiences while interacting with the company. This perception can be determined by a variety of factors, from the brand’s tone of voice conveyed on the website, to how easy it is to complete a transaction, from the effectiveness of a conversation with a customer care operator, to using chatbots to resolve problems. In general, the perceived value related to the individual interaction depends on the timeliness and completeness of the brand’s response to a user question, the degree to which their expectations are met, and the ability to keep the relationship viable through follow-up actions.
Customer experience and loyalty: matching expectations with reality
According to Zendesk, 74% of customers say they are loyal to brands, and 57% say the quality of service they receive has a strong influence on their feelings of loyalty over time.
Once again, the central issue is the match between expectations and reality. If customer expectations of a customer experience in a given industry are bound to rise, the brand has to improve the overall quality of the service it offers and digital tools must help to reinforce this.
On the company side, recognizing the impact of the customer experience on retention processes yields significant savings. It’s well known that customer acquisition can cost five times more than the costs of retaining existing customers. Lost customers leads to lost revenue, both directly, because payment for the product or service is lost, and indirectly, if we think about the resources spent (money and time) to replace customers.
Another issue that companies cannot underestimate is this: a customer dissatisfied with a disappointing customer experience may trigger a chain of negative reactions, perhaps with a simple post on social media that goes viral. At that point, you will have to consider the cost to rebuild your reputation.
In both cases–in replacing the customers you lost with new ones and in fostering a counter-narrative that can mitigate the effects of bad publicity–a customer experience can be decisive because it allows you to focus on the specific target audience, intercepting it on multiple channels, at different times, with customized content built on the needs, wants, and desires of that audience.
Different customer experiences for each specific need
Today, companies can develop many different types of customer experience, thanks to the continuous progress of digital technologies, the increasing hybridization of touchpoints (especially between physical and virtual touchpoints), and the increasing performance of company channels. In today’s ever-changing environment, finding a winning approach for providing a good consumer experience can be complicated.
In other words, there is no single framework: every company is unique and so are its customers. Knowing them thoroughly, investing in long-term relationships, and providing personalized experiences are all essential aspects to consider. Companies need the right digital tools to create positive experiences, increase sales and fuel brand loyalty.
Within this wide variety of tactics and solutions, different customer experiences, if well designed and implemented with care and attention, can produce a positive impact on the relationship with the target audience and allow them to build a significant competitive advantage.
Let’s dig deeper: why is customer experience so critical? Why can companies no longer ignore it?
3 reasons why customer experience is increasingly important today
The customer experience has always been important for companies of all sizes and industries. But in the scenario that has emerged with the advent of the internet and mass digitization, it is even more so. For simplicity’s sake, we will try to summarize these considerations in two points.
1. Digitization has offered the enterprise new ways of contacting their target audience by opening up channels of access to online stores that make it possible to build a much broader, more articulated space for conversation than has never before been possible. This includes:
- direct (users who directly entered the URL of the site in the search bar),
- referrals (users coming to the store from external links),
- organic search (users coming from search engines),
- paid search (users coming from sponsored ads on search engines),
- social (users arriving from links on social networks),
- email (users arriving from links on newsletters),
- display (users arriving from banner ads outside the store).
2. In the transition from traditional broadcasting to web-enabled narrowcasting, the very status of the customer has profoundly changed: from being a passive spectator, he has finally been able to participate in the dialog with the brand, finding unexpected opportunities to be seen and recognized and to have his voice heard to a degree and with a strength and relevance that was simply impossible before.
These two considerations are a necessary premise before we can talk about the three reasons that make customer experience not only a widely viable alternative for companies of all sizes but the go-to choice for all marketers.
1. Affects revenue
The bottom line is formed at the convergence of customer expectations and experiences. When customers connect with a company, what they want from the exchange (money-product/service) is to get the most value by employing reasonable amounts of resources. This is the concept of convenience in its broadest sense, where the expense incurred (and justified) encompasses monetary, material, and non-material elements (for example, the emotional investment, the cultural and symbolic definition of the purchased product, the satisfaction with a smooth, frictionless, possibly humanly fulfilling interaction belong to this category).
According to Forrester’s Customer Experience Index (CX Index™), compared to 2020, 21% of U.S. brands experienced a significant increase in brand loyalty scores. New customers acquired and customers who remained loyal over time experienced a higher quality of the experience they offered. This means that companies have been able to respond to customers’ changing needs by designing digitally transformed pathways for them: e-commerce portals, mobile apps and touch points integrated with data management systems, to name a few. By ensuring a good experience, customer willingness to spend has increased.
The capabilities that digital tools enable play a central role in this growth. They improve the customer experience by streamlining and optimizing a range of processes: from the ecommerce proposition becoming more and more profiled, to the ability to finalize the purchase from any platform with a simple click, to the elimination of unnecessary paperwork. All of these steps translate directly into business performance such as new revenue, reduced service costs, and higher ROI.
2. Contributes to business resilience
Markets reward customer-centric companies. Digital tools, which collect and process incoming customer data from multiple touchpoints, enable companies to adapt to consumers’ needs and have a comprehensive overview of how their interactions are progressing. The customer journey can thus be mapped more accurately and precisely, and short-term fluctuations and long-term market conditions can be addressed more effectively.
According to a recent Harvard Business Review Analytic Services report, out of 1,100 executives surveyed, only 15% reported having access to a comprehensive view of customer data, and only 17% reported that the organization was able to provide real-time market insights and actively promote engagement. Optimizing operational models–modernizing IT infrastructure and breaking down information silos–then becomes crucial for supporting a customer experience strategy and deriving insights that are truly useful in overcoming sudden crises and unexpected events.
Data-driven marketing for customer experience development
Also according to Gartner, the digitization of the customer experience has accelerated dramatically in both B2B and B2C, so much so that a study by Epsilon showed that 80% of customers expect companies to provide access to a digital ecosystem that can deliver personalized and meaningful experiences. And, even, 39% of customers say they do not want to spend money on a brand that does not offer personalized experiences.
This digital ecosystem is based on the entry of data-driven marketing actions, an approach made possible by data management systems and providing significant benefits:
- By redesigning workflows by which the brand intends to measure, engage, monitor, learn, and optimize;
- By supporting long-term brand-building goals (and not focusing on short-term tactical campaigns);
- By following the customer through the entire lifecycle, from the potential acquisition stage to the advocacy stage (where the acquired customer spontaneously provides “public” support).
By leveraging the potential of data-driven marketing, brands are increasingly focusing their efforts on creating seamless customer experiences, allocating their budgets on initiatives that are aimed at harnessing the potential of different channels in an omnichannel approach that can offer greater assurance in case there is a need to ensure responsiveness and business continuity in the face of unforeseen events.
3. Increases the retention rate
Bad experiences drive customers away faster than people think. Even brands with long and glorious traditions could lose a quarter of their customers forever in a single day after a single bad experience. According to Annex Cloud, 37% of customers will never buy from a brand again if they encounter unsatisfactory experiences. Zendesk’s research indicates an even higher number, showing that 50% of consumers will switch brands after only a single bad experience.
The truth is, there is no such thing as unconditional loyalty in the market. However, there is a tight correlation between the customer experience and loyalty. When it comes to choosing which brand to buy from, customers are faced with multiple viable options and their loyalty can be much more easily lost than won.
The best way to combat customer abandonment, increase retention and loyalty rates, and thus consolidate growth is to invest in the customer experience and use customer information to continue to improve. In other words, it’s about committing to a great customer experience.
Enhancing the customer experience is an iterative process. A recent study commissioned by Qualtrics revealed that positive experiences directly increase purchases and referrals, and the impact is even greater when you focus on building emotional connections with your customers. To retain existing customers, you must motivate them, convince them to repeat purchases (reinforcing patterns that the company knows better and better), and offer them upselling and cross-selling solutions that align with their needs, wants, and goals. These efforts result in increased sales, greater customer lifecycle value (CLV), and a more predictable revenue stream.
Customer experience is the new competitive advantage
Before the advent of digital, the customer experience was driven solely by in-store or direct interactions. Today, however, it is articulated in the set of customer interactions, both physical and virtual, that occur on every platform, from the first point of contact to the established relationship. Customer experiences will continue to evolve in the coming years, both because new technologies will shape them and because they will reconfigure the different modes through which we interact.
The technologies being developed today are bound to strengthen the customer experiences of tomorrow: artificial intelligence, cloud technology, augmented reality, voice assistants, and solutions for interactive and personalized communication will continue to shape the standards of customer experiences. This is why investing in the customer experience has never been more necessary.