Customer Experience: It's More Than Customer Satisfaction

The time, money and effort spent on gathering and analysing customer satisfaction measures isn't worth the economic payback, and yet companies large and small regularly survey their customers to get feedback on their satisfaction levels. The problem with customer satisfaction surveys is that they don't tell you much about the perceived differentiated customer experience that drives loyalty in terms of intentions to repurchase, or advocacy in terms of willingness to actually refer you to friends, family and colleagues.

Why is this important?

Satisfaction, as we all know, is an ever moving bar. What kept customers happy about our products and services in the last 10, 5 or even two years wouldn’t now meet the expectations of the average person in the street. Customer wants, needs and expectations move as quickly as the market itself, and so what would have delighted and surprised them a short while back is now seen as run of the mill and worse still as a hygiene factor: while they may not remain loyal because it, they will defect the moment it is absent. So customer satisfaction ratings only ever measure a customer “happiness quotient” with existing transactions.

Recent studies on the other hand, particularly those of Fredrick Reicheld (et al), have shown that measuring and managing the perceived value that the customer places on the ‘experience’ of dealing with the product or service provider is a much better measure of organisational performance from a customer perspective, and from it a better predictor of profitability and growth. The reason for this is that real profitability and growth comes from loyal customers who not only buy more (and other things), but stay with the company longer and are more likely to refer the service provider to family, friends and colleagues. We already discovered in the mid 1980’s that it’s operationally nine times cheaper to keep an existing customer than to acquire a new one, so customer retention is key to growth and profitability.

Customer loyalty in these days of ‘rate chasing’ with credit cards and mortgages, and best unit price with gas and electric utility companies is, of course, a fickle thing. What is known is that customer loyalty is a value-laden concept that has everything to do which the customer-relationship, and particularly the psychological and emotional perceptions engendered in the customer experience. In other words the customer has to feel good about their relationship with the company. Customer loyalty is more than the sum of the parts of superior value in terms of price, features, quality, functionality and ease of use. It’s about the entire customer experience that drives growth and profitability.

Customer satisfaction surveys only tend to provide a superficial measure of the behaviours that drive profitability and growth. We know this because detailed research has shown that between 60 – 80% of those customers who judged themselves to be “satisfied” or “very satisfied” on satisfactions surveys were saying so just before they defected to the competition.

No, the new measure of customer economic value and relationship with the company is Customer Experience Management.

What is Customer Experience Management?

Customer experience management is a way of looking at every single aspect and touch point of the company-customer relationship in order to develop and manage a customer experience that is intentional, consistent at every point of contact, differentiated from the competition and, most importantly, valued by the customer. Customer loyalty is based on the psychological value that the customer perceives in doing business with the service provider. It enables the customer to come to positive conclusions about how satisfied they feel when doing business with the company and its employees, whether or not she or he wants to continue doing business with the company, and most importantly, whether or not they are willing so say positive things about their experience rather than bad mouth the company and its employees.

The customer experience concept is advocated not only by researchers, but by operational exponents in the business world such as, Dell Computers, Four Seasons Hotels and Superquinn supermarkets. Indeed, Feargal Quinn, CEO of Superquinn is quoted as saying: “We are in the business of selling an experience that delights our customers”. ‘Selling an experience’, not ‘the best products at the most affordable prices’. But to ‘sell’, manage and measure the customer experience service providers have first to answer three questions:

- What customer experience is the company trying to deliver?
- What emotions does the company want to evoke in its segmented market?, and
- What is the company’s customer experience vision?

In answering these questions companies have to evaluate the very basis of their relationship with their customers, rather than the transactions they have with them. By trying to assess and manage the quality of their customer relationships, companies are using a different metric to the simple ‘satisfaction’ one. Evaluating the customer relationship requires understanding what is valued by the customer in the experience – in every detail and at every level. The quarterly, 6-monthly or yearly customer satisfaction survey doesn’t provide the depth of insight that customer experience management does because, inevitably, it will seek general feedback on products, pricing and service. Customer satisfaction surveys don’t usually measure the emotional impact of the customer relationship, and it’s the emotional impact that is a primary driver of a customers’ decision to choose one provider above another. While they provide data on key areas of customer satisfaction, satisfaction surveys don’t generally provide much insight into how a company can nurture and develop customer loyalty; the one key driver of profitability and growth.

Customer experience management rather than satisfaction surveying

There is no doubt that customer experience management (CEM) is the new wave in managing the customer relationship. It goes beyond and takes much more than just good customer service. In a world in which it’s becoming ever more difficult to be differentiated, where similar products, similar prices and similar services are becoming more of the norm, the differences will emerge in the customers mind based on the brand, the perception and the feel of a company; all of which are managed and delivered through the customer experience. And it’s the customer experience that differentiates the company, creates and builds loyalty and ultimately leads to growth and profitability.



about the author

Joe España is Managing Director of Performance Equations, a management consultancy that helps companies and individuals become more successful by directly linking strategy to people and business performance. Joe and his colleagues typically work with organisations who realise that "off the shelf" solutions will not best meet their particular circumstances or strategic objectives. Their clients want intelligent, robust and measurable solutions that are bespoke to their particular needs, and that deliver performance where it matters most; the bottom line.

Joe can be contacted by email at info@performance-equations.co.uk. To find out more about Performance Equations and how they help organisations achieve better results, visit http://www.performance-equations.co.uk/.

Useless at managing change

Why it is that so many manager are seemingly useless at managing change effectively? Despite the increasing amount, speed and nature of change recent research suggests that leaders and managers are a primary cause of stress, conflict and harassment at work. With as many as a third of employees reporting that they are often kept in the dark and not consulted when major change occurs in their companies, is this ‘uselessness’ endemic in management or are workforces victims of lack of knowledge and skills?

It’s estimated that large firms undergo a major change approximately once every three years and smaller firms are changing almost constantly. With over 75% of change programmes failing fully meet objectives, the implication is that businesses spend a large chunk of their time and money failing to get the results they want. Companies are littered with a history of poorly executed, half-finished change initiatives.

Recent reports by the Chartered Institute of Personnel and Development (CIPD), Roffey Park Management Institute and others seem to add to the increasing body of evidence that many organisational change initiatives are failing due to lack of employee engagement and buy-in because bosses are not managing either the process or the communication effort effectively. Results: a growing perception that leaders and managers are uncommunicative, do not ‘walk-the-talk’, and haven’t got what it takes to manage the transition effectively.

So what’s needed?

Organisations need to take a closer look at several areas if they want to improve their change skills: choosing the team, project management, consulting and communicating.

Managing change requires different skills at different phases, and it is important to take into account the skills required when thinking about who manages the different stages of the change project. For a change programme to work it's also worth asking: ‘Who exactly is going to execute this plan?’

Change management entails thoughtful planning and sensitive implementation, and above all, consultation with, and involvement of, the people affected by the changes. As soon as change is forced on people, problems arise. Change must be realistic, achievable and measurable. These aspects are especially relevant to managing change where it affects people at a personal level, like being re-structured and “downsized”.

Gain commitment, not acquiescence

Many leaders and managers try to ‘sell’ the change to people as a way of accelerating 'agreement' and implementation. Unfortunately, 'selling' change to people who aren’t fully committed to the programme is not a sustainable strategy for success, unless the aim is to rake jelly up hill with a fork. When employees listen to management and the ‘high-up’s selling them a change, people will appear to accede, but quietly either at best not support the change, or at worse will actively conspire against it.

Instead, change needs to be understood and managed in a way that people can cope effectively with it. Change can be unsettling, so managers logically need to be a settling influence. But helping individuals and teams to deal with the psychological reactions to change or transition is often the hardest part of managing change. And here is the rub. The best strategy, the best laid plans, the best implementation can all go awry as soon as people are involved.

Leaders and managers need to check that people affected by the change agree with, or at least understand, the need for change, and have a chance to decide how the change will be managed, and to be involved in the planning and implementation of the change. Face-to-face communications to handle sensitive aspects of organisational change management is the best course.

These principles should be applied also to very tough change like making people redundant, closures and integrating merged or acquired organisations. Bad news needs even more careful management than routine change. Hiding behind memos and middle managers will make matters worse. Consulting with people, and helping them to understand does not weaken position - it strengthens it. Leaders who fail to consult and involve their people in managing bad news are perceived as weak and lacking in integrity. Treat people with humanity and respect and they will reciprocate.

Change management principles

The approaches outlined above are what I call GOBO (Glimpses Of the Blindingly Obvious). But as we know, what might look like common sense isn’t always common practice. We need some guiding principles:

Continually involve and agree support from people at all levels.
Understand where the organisation is at the moment.
Understand where it needs to be, when, why, and what the measures will be for having got there.
Plan development in appropriate achievable measurable stages.
Communicate, involve, enable and facilitate involvement from people, as early and openly and as fully as is possible.

John Kotter’s 8 Steps

Harvard Professor, John Kotter, offers some helpful thoughts about managing change and transition. Kotter's eight step change model can be summarised as:

Establish a sense of urgency - inspire people to move, make objectives real and relevant.
Form the guiding team - get the right people in place with the right emotional commitment, and the right mix of skills and levels.
Create a vision - get the team to establish a simple vision and strategy, focus on emotional and creative aspects necessary to drive service and efficiency.
Communicate for buy-in - Involve as many people as possible, communicate the essentials, simply, and to appeal and respond to people's needs. De-clutter communications - make technology work for you rather than against.
Empower others to act - Remove obstacles, enable constructive feedback and lots of support from leaders - reward and recognise progress and achievements.
Plan & create short-term wins - Set aims that are easy to achieve - in bite-size chunks. Manageable numbers of initiatives. Finish current stages before starting new ones.
Consolidate and sustain the effort - Foster and encourage determination and persistence - ongoing change - encourage ongoing progress reporting - highlight achieved and future milestones.
Institutionalise the change - Reinforce the value of successful change via recruitment, promotion, and new change leaders. Weave change into culture.

Where to start

These eight steps to managing change and transforming the organisation are tried and tested, but before launching into organisational change, key questions need to be asked:

- What do we want to achieve with this change, why?
- How will we know that the change has been achieved?
- Who is affected by this change, and how will they react to it?
- How much of this change can we achieve ourselves, and what parts of the change do we need help with?
- Do we have the skills to cope?

So often, managers tend to focus on the end rather than the means when approaching change. But this will only lead to failure. Leaders and managers need to look at the whole process when approaching change, from the communication and development of change to the end result. Only by having total clarity about what needs to be achieved, gaining the full and participating commitment of those involved, and being brutally honest about the prevailing skill level to successfully manage change can management get out of this stereotypical picture of being seemingly useless in the eyes of their people. With a bit of consideration and skillful practice managers can avoid becoming the primary cause of stress, conflict and harassment at work during times of change.

That reminds me; I must go and announce our re-structure.

To find out more about Performance Equations click here