Thursday, July 20, 2017

Different Brands Have Different Reasons To Improve Customer Experience

Photo by Igor Ovsyannykov on Unsplash
You likely hear a lot about customer experience these days. Business media is full of articles about CX, and the data we collect at Gartner demonstrates that CX metrics are among marketers' most important. In addition, business leaders tell us they are investing more in customer experience.

But why? Why is CX essential for your brand? What will improving CX do for your various stakeholders--not just customers, but employees, leaders, and investors, as well?

Can you answer those questions with something other than platitudes about the importance of happy customers? Because if you cannot define, in a very real way, why CX matters to your brand, then you cannot make others inside your organization care, secure collaboration, obtain funding, or encourage any meaningful change.

Many Brands Have Clear CX Opportunities

Different brands have different potential benefits and expected outcomes in CX. There no single set of CX benefits or metrics that will fit every company equally. Understanding your brand's unique situation, challenges, and opportunities is a good place to start when defining a CX vision and requesting necessary commitments from leaders and peers.

For some brands, improving their CX offers relatively clear and obvious advantages. For brands in contentious marketplaces with intense competition, fairly easy switching, innovative challenger brands, frequent repurchase actions, and a diverse set of customer selection criteria, the need for CX initiatives and investments can be easy to discern. Brands in these sorts of marketplaces--that is to say most brands--need to focus on CX because:
  • Competitive differentiation improves demand: Brands are created through experiences--what the brand does, not just what it says. Through disciplined CX processes, you can understand what your customers value and work to meet those expectations better than your competitors.
  • Strong experiences foster loyalty: Brands find it less costly to keep than to acquire customers, and they are more effective at cross-selling to current customers than gaining new prospects. Providing experiences that customers value builds relationships, diminishes churn, improves share of wallet, and generates higher margins.
  • Powerful customer relationships generate robust word of mouth (WOM): Brands create the greatest breadth and depth of WOM by meeting and exceeding customer needs and producing elevated levels of satisfaction. In our ad-blocking and ad-skipping world where consumers are less trusting of brand ads and content, credible person-to-person brand advocacy between those in established relationships delivers greater awareness, consideration, inbound traffic, conversions, and sales.

Airlines and the Question of CX Relevance

But what if your brand is in a different sort of marketplace? One with high barriers to competitive entry, greater customer switching costs, less competition, perceived parity in offerings, sparse repurchase, or consumers obsessed with price. In situations like these, the standard and obvious benefits of CX are, well, less standard and not so obvious. Utilities with little competition, life insurance companies with infrequent repurchases, telecoms with significant perceived barriers to switching, and other brands may question the benefit of increasing (or risks in diminishing) customer loyalty and advocacy.

United's customer incidents and PR crises provide an excellent lens to consider the CX challenges faced by air carriers. In the past decade, United Airlines has suffered two CX disasters so infamous that they each have their own Wikipedia entry: "United Breaks Guitars" in 2008 and this year's widely circulated video of a bloody passenger being dragged from a flight. But while each generated an enormous amount of publicity, there is no evidence either situation severely affected the airline's business in any significant or lasting way.

Some people claim United's stock decreased in the days after April's incident went viral, and they're correct--but stocks move on a daily basis for all sorts of complicated reasons, and within a couple of weeks, United's stock was trading no better or worse than its competitors. There is no indication this incident hurt the airline's stock price, and even if it did alter the price for a few days, executives don't worry about or base decisions on daily fluctuations of stock value. The same was true in 2008 when pundits claimed the viral video would damage United's business, but in reality, the company's stock outperformed the competition following that PR incident.

Nor is there evidence of a significant change in flyer preference or purchase behavior. I wrote back in April that United's well-publicized incident would not adversely impact demand for United's flights, and it appears I was correct. For the three months ending in June, including the month of United's passenger debacle, the company "boosted ticket sales even as fares climbed higher," resulting in a lift in both revenue and profits. Customers did not abandon United after seeing the video of the doctor dragged from the plane, just as they did not quit the airline after seeing the funny music video about a broken guitar.

I am not suggesting these incidents didn't cost the airline. As I wrote in April, this event elevated expenses for United, such as the value of the financial settlement offered to the wronged passenger and the lost productivity dealing with the sizable PR crisis. But in the end, United did not suffer lasting business or economic damage from the incident, despite the fact thousands of people swore in YouTube comments, tweets, and posts they would never again book a flight with the airline.

Does this mean air carriers don't need to worry about CX? Is there no upside to improving customers' experiences or downside to repeated violation of customer expectations? No, but the CX equation is different for brands in verticals with unique situations.  

No comments: