Want Customer Loyalty? Improve Customer Experience First.

Customer satisfaction has long been a logical goal for most companies -- but in practice that has often meant little more than, say, efforts to assure that Web sites are useful and usable. Not much thought -- and very few tangible statistics -- revolved around the customer experience , or the effect it has on customers' emotional attachment to a company. However, judging by two recent reports from industry analysis firm Forrester Research, the winds of customer service are shifting: We're finally seeing hard data proving the connection between customer experience and customer loyalty, and what's emerging is a growing emphasis on improving customers' experiences. According to "Customer Experience Spending Intensifies in 2008," a Forrester study authored Senior Analyst Megan Burns, more than 80 percent of respondents say that improving the usability, usefulness, and enjoyability of the online experience is more important in 2008 than in years past, with the top two spending priorities being Web analytics and customer satisfaction surveys. According to Burns, that one-two finish reflects a growing focus on measuring key components of the customer experience -- something she says she finds unsurprising. In fact, she adds, one of the underpinnings of her study was to quantify the rumblings she had been hearing from companies with regard to hard-number results. Bruce Temkin, a Forrester vice president and principal analyst, customer experience, echoes Burns' thoughts on the importance of quantifying what customer service personnel were already talking about. Going beyond mere investment projections, Temkin's study, "The Business Impact of Customer Experience," concludes that customer experience directly correlates to customer loyalty. Temkin admits the conclusion may seem like a no-brainer, but he claims no quantifiable numbers had ever reinforced the connection. "We've taken something that certainly a lot of executives -- and clearly just about all customer experience pros -- knew, which is that improving the customer experience improves business results," he explains. "But, in all cases that I've seen, people talk about the anecdotal connection between the two. What we've done in this report is we've quantitatively tied together 'change of customer experience' with 'the change of some loyalty factors.' " Relying on data from the 112 firms in Forrester's 2007 Customer Experience Index, Temkin's study calculates the difference between each of the firms' specific Customer Experience Index (CxPi) score and the CxPi average for that firm's industry. For all industries, the calculations reveal that a firm's CxPi goes hand-in-hand with customer loyalty. While the findings show a stronger connection with consumers' repurchase plans than with their reluctance to switch providers, there was "at least a medium degree of correlation in both of these loyalty measures across all of the industries," according to the study. Bank customers showed the strongest relationship between customer experience and loyalty, while health plan customers showed the lowest correlation. Temkin explains that the last-place finish for health plan/medical insurance customers is no surprise -- but the fact that bank customers came in first was shocking. "Banking relationships have a little bit of an emotional factor to it," he says. "Customers are influenced by the trust in the institution which is influenced by how they're treated. The experience plays into perception of trust, which plays into their loyalty with the institution." Temkin hopes that his statistics, paired with Burns' studies on customer experience, will help boost companies' dedication to improving customer experience. "In my mind, companies need to have a better benchmark [to] understand when, how, and how much to invest in the customer experience," he says. "Hopefully, this research puts into perspective the appropriate investment level for customer experience [solutions], which I think is significantly higher than what companies are putting into it today." While there may not be much (or perhaps any) hard evidence yet to back up the rosy projections of increased spending on customer experience solutions, many vendors in the space claim to be seeing an increase in queries from potential users. "We've definitely seen an uptick in the volume of companies we are talking to [about customer experience solutions]," says Geoff Galat, vice president of marketing and product strategy at Tealeaf, a San Francisco-based software company specializing in customer experience management. Galat says that one of the main reasons to specialize in customer experience now is the maturity of Web sites that companies engineered on their own. Until very recently, the notion of customer experience was far removed from most companies' capabilities. In the past, he says, "people nodded their heads politely because they were so concerned with just getting their sites actually out the door and delivered, that optimization was almost a secondary thought to them," he recalls. Only when a company's Web site is fully operational and has achieved a level of maturity, Galat says, can that company try to focus on providing a high-quality customer experience. Fortunately -- or unfortunately, depending on your perspective -- today's tight economic landscape may be just what's required to bring customer experience to the fore. "We all know it's far more expensive to acquire new customers than to retain existing customers," Galat says. "In this difficult economy, it will be easier to get most of your revenue from the people you already have a relationship with." The Forrester reports suggest that, as momentum behind customer experience builds, companies will soon be fighting to prove the superiority of the experience they provide. To that end, Burns' study provides one last warning: Companies must look "beyond the browser" and invest in the quality of improving cross-channel interactions, something 78 percent of respondents claim is a higher priority for 2008. "The cross-channel characteristic is a key differentiator for the call center -- marrying what happens in the call center to what happens on the Web site," Galat says. "In a lot of companies, there's a massive disconnect between the call center and the Web site, and the ability to bridge that is a key thing for people to do."

Related articles: Reality Check: The Longitude of Experience Reconsidering the life cycle of customer interaction. Customer Satisfaction Is Just the Beginning According to statistics from a newly published study, organizations are realizing that "customer satisfaction" means far more than just "happy customers." Kana and IBM Team Up for New Customer Experience Solutions Expanding an existing partnership, the companies are expecting services-oriented architecture to help foster "seamless" customer-service integration. 9 Essential Strategies to Improve Customer Experience SAP CRM 2008: As advertising budgets shift to online efforts, customer care is where the money is. Bringing the Customer Aboard the Unified Communications Bandwagon Contact center solutions vendor Aspect Software has a new UC strategy -- and the company says it starts with the customer. Sage's New New Global Strategy Sage Software's latest CRM shift promises one step up in mobility and another toward integration. Vocal Ease Companies should plan and implement a formal approach to collecting feedback and inserting the customer's voice into the business strategy. Who's Responsible for the Customer Experience? Serve your customers what they want, how they want it, and you may curtail the chances of frustrating them by mismanaging their customer experiences. Viewpoint: Want Superior Customer Experience in Your Contact Center? Start with superior agent experience. Viewpoint: It's All About the Customer Experience Organizations must understand their customers and adapt to their behavior. Viewpoint: Four Components of the Successful Customer Experience It's about more than fulfilling a transaction.

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