Customer Experience, Customer Loyalty
A few weeks ago we were sharing a discussion with a client about customer experience as a means of creating customer loyalty. We agreed that this was a real opportunity today for companies that want to compete on something other than price, and that a way to do this is by focusing on creating a delightful and memorable customer experience. Afterwards, we talked about it a great deal more around the Livewire offices and looked at some of the history and more recent research.
Bruce Temkin, VP and Principle Analyst for Forrester Research who conducts the annual Customer Experience surveys noted a rising correlation between customer experience and loyalty in the 2008 study. Using more than 4700 consumer surveys across 12 industries, Forrester research examined the correlation between customer experience and three key loyalty measures: repurchase intentions, reluctance to switch, and likelihood to recommend. Temkin stressed that companies need to be more customer-focused and more experience-driven than ever (2009).
The Experience Economy was introduced in the pages of Harvard Business Review in 1998 by authors B. Joseph Pine II and James H. Gilmore, and was followed by their book a year later. In it, they trace the evolution of the economy from agrarian through industrial, service, into what they currently define as one focused on the consumer experience. They described the nature of the experience offering as its memorability, and its key attribute is one that is personal to the guest. They advise designing for an experience where the customer has opportunities to participate and feel connected with their hosts. The environment should be one that is thematically consistent, supporting the activity in an overall pleasant and satisfying manner.
Looking more recently at types of experience we found some recent research into customer delight in a retail setting which yielded some dramatic and tangible outcomes that was especially interesting to us as internal communicators.
The 2004 study by Arnold, Reynolds, Ponder and Lueg, published in the Journal of Business Research (August 2005), investigated the underlying factors of delightful and terrible retail shopping experiences. According to the authors, delight is an understudied topic of interest in marketing literature though it is of great interest to practitioners looking to increase customer loyalty.
“Generating satisfied customers simply may not be enough in a marketplace characterized by intense competition, broad product assortment, convenient retail locations, and 24/7 shopping anytime, anywhere on the Internet. Perhaps most critically, customers expect to be satisfied; thus, focusing on satisfaction simply is not enough” (Oliver et al., 1997, in Arnold 2005, p 1141).
Arnold et al were partial to Plutchik’s (1980) definition of delight as a “combination of joy and surprise” (p1134). It was to provide both a satisfying and pleasant shopping experience based upon expectations held by the customer that, in being exceeded, resulted in an intense feeling of pleasurable surprise. A terrible experience was one that was both unsatisfying and unpleasant, presumably by failing to satisfy expectation by a surprising margin.
The researchers used the Critical Incident Technique (CIT) of analysis on 113 interviews with shoppers to identify groups of factors that make shopping a delightful or terrible experience.
Upon analysis, the researchers found that interpersonal effort and interpersonal engagement, or the lack of it, on behalf of front line employees “each account for large percentages of the total number of critical incidents for both the delightful (39.8% and 25.7%, respectively) and terrible (28.3% and 35.4%, respectively) shopping experiences” (p1142). This suggested that these two employee behaviours alone underlie two-thirds of delightful or terrible experiences.
The authors recommended empowering frontline employees to “go the extra mile” or “do something special for a customer when the opportunity arises” as being the most sustainable method of delighting customers (p1142). To consistently achieve these behaviours from employees requires treating engaged employees with “delight-eliciting behaviours” particularly interpersonal effort and engagement on their behalf. They also recommend that senior management focus on creating an organizational culture that supports employee and customer delight.
From our perspective, communications plays a key role in supporting and driving this culture. Underlying the distinct and delightful customer experience is the employee experience of their workplace. By helping define the goals, share examples of delighting customers and recovering potentially terrible experiences, recognizing individual employee and company successes, and keeping the leadership commitment to delight a top-of-mind priority employees will have a clear line of sight to how they create these experiences with their actions.
Equally important is the manner in which this is accomplished so that the experience of the communications is consistent, enjoyable and reinforces the feelings of purposefulness that validate employee efforts. We need to consider:
- the effectiveness of current communications and the impact new messaging will have on reception by the numerous employee communities in the organization;
- the spirit of the delivery of key outbound messages and whether or not they reflect the brand experience that is to be presented to customer; and
- how best to create significant opportunities for meaningful two-way communication and for employees to connect with each other and the leadership;
Just how much is this worth to the bottom line? According to Forrester Research, customer experience can swing $184 million in revenues for a large retailer through customer loyalty effects (Temkin 2008).
Arnold, M.J.; K. E. Reynolds; N. Ponder; J. E. Lueg (2005). Customer delight in a retail context: investigating delightful and terrible shopping experiences. Journal of Business Research, 58 (8), 1132-1145. doi:10.1016/j.jbusres.2004.01.006
Pine, J. and J. Gilmore (1998) The Experience Economy, Harvard Business Review. Retrieved July 3, 2009. http://hbr.harvardbusiness.org/1998/07/welcome-to-the-experience-economy/ar/1
Temkin, B.D.; H. Manning, O. Melnikova; S. Geller (2008). The Business Impact Of Customer Experience: Poor Experiences Can Cost Large Firms More Than $180 Million Per Year. Forrester Research. Retrieved August 14, 2009.
Temkin, B.D.; W. Chu; S. Geller (2009). Customer Experience And Loyalty: A Closer Look: Impact Of Usefulness, Ease Of Use, And Enjoyability Differs Across Industries. Forrester Research. Retrieved July 6, 2009. http://www.forrester.com/Research/Document/Excerpt/0,7211,53961,00.html.