What makes Barnes & Noble a better brand than Charter Communications--and many others? Customer experience.
Forrester Research recently released its third annual Customer Experience Index. The study ranked 133 US companies across 14 industries using feedback from more than 4,600 consumers. Barnes & Noble came in at the top for the second year in a row, slightly ahead of Marriott Hotels and Hampton Inn. Other winners: Amazon.com and Costco. At the other end of the spectrum, Charter Communications took the bottom spot for the third consecutive year. Also at the bottom: major health care providers such as CIGNA, Aetna, Anthem, Medicaid and United Healthcare.
While most of the top-rated companies are retailers and hotel chains, three financial services firms cracked the top 20: credit unions, SunTrust Bank and The Vanguard Group. But financial services firms did not fare well overall. Comparing the 2010 results to last year's, banks and credit card issuers had the largest declines.
One thing is very clear from the data: There's enormous room for improvement. Only 13 of the 133 companies received "excellent" ratings while 45 received "poor" or "very poor" ratings.
Customer Experience Drives Loyalty
Why does good customer experience matter to CMOs? The answer is simple: customer loyalty. Our research shows that the customer experience leaders have significantly more loyal customers than customer experience laggards. On average they have 14.4% more customers willing to buy from them, 15.8% more customers reluctant to switch away from them and 16.6% more customers likely to recommend them.
An improvement in customer experience can easily translate into hundreds of millions of dollars of incremental annual revenues. As senior executives recognize this connection between customer experience and business results, they'll increasingly jump on the customer experience bandwagon.
Unfortunately, customer experience doesn't fall neatly into a single function. It requires a member of the executive team to champion a cross-functional initiative. That's a great place for a CMO to step in.
The Three Golden Rules Of Customer Experience
I work with a lot of executives leading these efforts and often recommend that they adopt “experience-based differentiation” (EBD) as their blueprint for success. EBD is built on three key principles:
1. Obsess about customer needs, not product features. Rather than racing to bring new product features to market, companies need to refocus on the needs of their customers--who might even want fewer features or completely different offerings. As the retail market took a hit in the recession Cabela's noticed a surge in its firearm business. Instead of just pushing more guns into the stores, the Cabela's executive team listened to dozens of calls from this growing base of customers to better understand their needs.
2. Reinforce the brand with every interaction, not just communications. One bad experience has more influence on a customer than a lifetime of traditional brand messaging. That's why the brand needs to be reinforced at every customer touchpoint. When Staples started its "That Was Easy" campaign, it set out to fix every interaction that would not live up to that statement. This brand-centered evaluation led to the redesign of its rebate process, which many customers say is so easy to use that they'll make Staples their primary provider of office supplies.
3. Treat customer experience as a competence, not a function. Delivering great customer experiences isn't something that a small group of people can do on their own--everyone in the company needs to be fully engaged in the effort. When Alaska Airlines rolled out its "North Of Expected" marketing campaign last year it started by spending several months communicating the message to its employees. Why? Because one of the key goals of the campaign was to rebuild the company's service-oriented culture.
Start By Amplifying The Voice Of The Customer
The best place to begin this journey is with a voice of the customer (VoC) program. Gathering and using customer feedback can help across all three areas of EBD. One of the less obvious, yet immensely valuable, benefits of a VoC program is better cross-organization alignment. It's hard to argue with clear customer feedback.
Good VoC programs contain four elements that we call "LIRM." The first step is to LISTEN. Companies need a strategy for tapping into multiple "listening posts," which include company-initiated surveys periodically or after an interaction as well as monitoring of customer-initiated areas like calls into the call center, customer service e-mails and social media sites. We see a growing trend in companies tapping into this unstructured, unsolicited feedback.
In the next stage, INTERPRET, companies analyze the data and form hypotheses about what it means. Is there a problem that needs to be fixed? Is there an unmet need to take advantage of? Sometimes this insight comes from deep statistical analysis while other times it can come from the right person looking at a single piece of feedback.
Now it's time to RESPOND. Firms are increasingly accelerating the pace with which they take action on customer feedback. It's not uncommon for organizations like Charles Schwab to get in touch with clients who give negative feedback or route the information to supervisors who can use it to coach front-line staff. Apple shares positive feedback with its store employees before every shift.
Finally, it's important to MONITOR the results of your action. If the goal is to improve customer experience, then you need to make sure that it's happening. Many companies use a metric like Net Promoter to track their progress. If done well, a VoC program can improve your company's customer experience, raise the power of your brand and increase the loyalty of your customers. That's not a bad day's work.
Bruce D. Temkin is a vice president and principal analyst at Forrester Research where he serves customer experience professionals.