What Drives a Profitable Customer Experience?

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Customer experience is the only source of sustainable competitive advantage in the age of the customer. Still, many companies have yet to recognize it as a fundamental business driver. Forrester's research shows that this poses a big risk, and has the numbers to prove it. Customer churn and negative word of mouth due to lackluster customer experiences are costing industries such as wireless service providers and airlines billions of dollars in revenue.

There is some good news. In 2014, brands showed improvements in their customer experiences—even in industries historically known for poor experiences, such as health insurance and TV service providers. In fact, just 1 percent of the brands ranked by Forrester's annual Customer Experience Index (CXi) benchmark fell into the "very poor" category for customer experience. That's the lowest number of very poor performers in the benchmark's seven-year history.

Most brands still have a way to go. Nearly half of those in the CXi scored in the "OK" category, and few have ever made the leap from good to great experiences.

What's holding firms back from delivering on what their customers expect? For many, it's a lack of clear understanding of the kinds of customer experiences that create and sustain customer loyalty. To uncover these experiences, Forrester surveyed more than 3,500 U.S. consumers to analyze hundreds of experience drivers across 17 industries. The results were enlightening and sometimes surprising.

Of all the tested drivers, a handful proved to be essential to customer experience and loyalty in every one of the studied industries. Brands in every industry leave money on the table if they don't do the following:

Make the customer feel valued. In 11 of the 17 studied industries, emotion has a bigger impact on customer loyalty than effectiveness or ease—these are the three core dimensions that determine the quality of a customer experience. One emotion in particular—feeling that a brand values you as a customer—proved critical across all industries. That's right. Customers want to feel as though a company values them before coming back for future purchases.

Resolve customers' issues or problems quickly. Rapid resolution is also a key driver across all industries. Two other drivers offer clues about what makes an experience feel quick to customers: 1) reps who are available when, where, and how it's most convenient for the customer and 2) reps who have the power to resolve issues without having to ask a supervisor.

Speak the customer's language. Consumers have something in common with billionaire investor Warren Buffett: They don't like to spend money on things they don't understand. Companies that avoid using industry lingo and corporate speak when talking to customers have better CX quality and more loyal customers than those that don't. Not surprisingly, this driver proved especially important in industries known for complexity, such as banking, investing, and health insurance.

In addition to the universal drivers that lead customers to perceive an experience as great, there were some interesting differences across industries. For example, even when the same driver popped up in two industries, it often mattered more in one than it did in the other.

In the airline industry, passengers are more loyal when customer service reps, gate agents, and counter clerks are knowledgeable enough to help them with whatever problem they have before, during, and after a flight. In the TV service provider field, customer loyalty can be earned by excelling at two money-related drivers. During the purchase process, customers want it to be clear what services they are paying for, and when the bill arrives, they want all charges to be clear and easy to understand.

Few firms have done this kind of driver analysis themselves, which is why so many are hovering around mediocre customer experiences. They had better get started, because knowing how your customers want to feel after an experience with your firm and delivering on those feelings is the only way to keep them on your roster and not the competition's.

Megan Burns is a principal analyst at Forrester Research, where she serves customer experience professionals.

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