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CX Investment 2023 Requires Your Focus

10 January 2023

by Isabelle Ohnemus

CX Investment 2023 Requires Your Focus

Image: ux-indonesia-unsplash

Early estimates of online sales for Black Friday – $9.12 billion, and Cyber Monday – $11.3 billion show a marginal increase upon last year of 2.3 percent and 5.3 percent respectively.1 However, there is no denying that macroeconomic headwinds – higher interest rates, inflation, and geopolitical instability, suggest that 2023 may pose challenges to consumer confidence and economic growth into early 2023.2

With the holiday season underway and the threat of a rail strike looming on the horizon,3 retailers may face disruption to the supply chain reminiscent of the experience that plagued eCommerce during 2020 and 2021 where contact centers were overwhelmed by a tsunami of WISMO (where is my order) tickets.

While most customer experience (CX) leaders predict an increase in their 2023 budget, research and consulting firm Forrester contend this is overly optimistic, advising CX leaders to ensure their investment in CX is as effective and efficient as possible if they are to insulate themselves against unexpected budget cuts.4

It is against this backdrop that CX teams enter an uncertain 2023 with companies losing their focus on customers, customer expectations continuing to rise, and an economy becoming more turbulent.5

The Experience Economy and Beyond 

In a narrow sense, CX is the sum or aggregate of customers’ perceptions and feelings resulting from all their interactions with a business or brand. CX is also used as shorthand for customer experience management (CXM) which refers to strategies, technologies, and practices for improving business results by creating an ideal experience for anyone interacting with a company.6

The concept of the experience economy is not a new concept and can trace its roots to the 1960s when the initial seminal theories on marketing and consumer behavior were developed and communicated. However, it was academics Pine and Gilmore, in a 1997 article for The Wall Street Journal (and subsequent writings),7 that conceptualized the idea of “experiences” as distinct from goods and services.8 Businesses must orchestrate memorable events for their customers. Memory itself becomes the product –  the “experience” which would give brands a competitive advantage by winning more customers and being able to keep them. 

Beyond experience, lies the frontier of transformation, and is best explained by Pine and Gilmore themselves:9

For into what does mass customizing an experience turn the offering? If you design an experience so appropriate for a particular person – precisely what he needs to be fundamentally affected by it over time – then it can’t help but become a life-transforming experience that changes the customer in some way.

But back to the present. 

In today’s digital economy, in which many products and services have become commodities available through online channels, customer experience has become the defining differentiator. Not only has the customer journey become more complex and non-linear in nature,10 customers also demand a more streamlined and enjoyable retail experience across all channels, all the time.

If the consensus holds, and the economy goes into recession, shoppers will have less discretionary income to spend. In the absence of growth, customers searching for value will gravitate toward retailers who make the purchase experience enjoyable. Brands will compete on the basis of CX, requiring continued investment in CX just to stand still.11

Image: Alexa from Pixabay

CX Transformation – What to Do & Not to Do

Build your CX excellence on these foundational pillars

Professional services firm KPMG identified the Six Pillars of Customer Service Excellence as foundational requirements in building strong customer experiences. All six factors must be executed well and as a whole, if an organization is to deliver superior CX:12

  • Integrity – Greater transparency is required of companies regarding how they collect and store customers’ personal information. Adherence to data privacy regulations and the implementation of stringent data protection measures is part of the personalized experience.
  • Resolution – Merely measuring and reporting on CX failures is not enough. Detecting, resolving, and removing customer pain is a prerequisite for excellent CX.
  • Expectations – Customer expectations, while ever-changing and always increasing, are often set outside traditional retail channels. Technology is pushing the boundaries of possibility. Influencer marketing and user-generated content constantly set and reset expectations providing brands with infinite opportunities to develop new experiences for their customers.
  • Time and Effort – Making a smooth and seamless CX requires the organization not only to remove any barrier that stops the customer from completing their journey but also to reduce the cognitive load – how much thinking we make customers undertake. Cognitive load makes buying decisions harder, more frustrating and can lead to customers abandoning purchases altogether.
  • Personalization – Savvy shoppers expect highly personalized experiences and are well aware that businesses have the tools to leverage real-time customer data to provide hyper-personalized experiences, offers, and rewards at the right moment.
  • Empathy – Business wants the best of both worlds. The speed, accessibility, and convenience of an automated AI-enabled world while maintaining a human touch. A balance must therefore be found 

Pitfalls to avoid in your CX programs

On the flip side of the coin, pitfalls to be avoided when initiating programs designed to transform CX include:13

  • Failure to link CX to value – Support from the C-suite is likely to wane if CX projects fail to demonstrate how they will drive increased customer satisfaction, loyalty, and conversion yielding better business results.
  • Fragmentation – Trying to fix everything all at once won’t work. A multiplicity of small, siloed fixes lacking focus dilutes impact resulting in incremental change at best. CX leaders must prioritize efforts and resources to focus on those initiatives that will create the most meaningful customer and business outcomes.
  • Solving for touchpoints – Addressing touchpoint-level customer pain points without understanding how the pieces fit together often leads to incremental CX changes that don’t get to the root of the problem. Mapping the customer journey on an end-to-end basis will reveal not only customer pain points within touchpoints but also hand-offs between them, potentially helping to identify where the issue originated.
  • Limited creativity – In the absence of a culture of transformational thinking, new ideas will often fall prey to the not invented here or we’ve tried that before syndrome. Groupthink takes over with employees limiting their creativity to safe, incremental improvements.
  • Sidelining customers upfront – While building a complete solution before delivery to customers is appealing, piloting minimal viable products with customers not only saves time but also leads to better outcomes. Businesses must develop a culture of experimentation that provides a safe space for employees to test and learn by exposing customers to proposed solutions early on in the design process.
  • CX on its own island – Every department within an organization, either directly or indirectly impacts the experience delivered to customers and plays a key role in the success of CX initiatives. There is no place for silos. CX transformation requires a cross-functional mindset anchored in a customer-centric culture. 
Image: Gerd Altman Pixabay

Back to Basics … Finish what you’ve Started

Many CX initiatives are failing to deliver on the promise of differentiation.14 The potential for a downturn in the economy along with the uncertainty that awaits business in 2023 is reason enough for CX leaders who continue to invest, to shield their programs from potential budget cuts by ensuring programs are both  effective and efficient, and deliver on their promise of better business outcomes.15

2023 is about execution and delivery of the post-pandemic programs launched in 2022. The following dominant CX themes are evident from a scan of the research and commentaries of leading consultancies and thought leaders in the CX space. 

Silos – eliminate data and employee silos across the organization

Complex organizational structures and business silos are obstacles in the path of a firm’s CX transformation. Cross-functional collaboration is required if personalized, contextualized experiences are to be delivered.16 

In a recent survey conducted by Harvard Business Review,17 39 percent of respondents identified data silos within business functions or channels as being their largest obstacle to generating business outcomes from their customer data. Similarly, 38 percent say limited alignment and collaboration across departments to meet customer data goals and processes are among their biggest challenges.

Automation – scale and optimize without sacrificing quality

Scaling a business while maintaining a consistent customer experience without sacrificing quality is a challenge. The level and quality of service that customers receive from companies is a key feature of the experience it provides. Contact centers play a key role in this domain. 

Augmenting existing call-handling systems through automation by deploying customer service chatbots employing natural language processing (NLP) to answer common customer questions will simplify the customer journey, reserving the resolution of high-impact tickets requiring a human touch to live call center agents. With 56 percent of customers aged between 16 – 44 preferring their first point of contact to be with an AI chatbot,18 using chatbots can reduce customer service costs by as much as 30 percent.19

Self-service – empower your customers

An early study by Zendesk showed that 67 percent of customers preferred self-service over speaking to a company representative.20 A later Harvard Business Review survey supported these findings, reporting 81% of all customers attempt to take care of matters themselves before reaching out to a live representative.21 

No doubt driven by the pandemic, more recent research indicates that 81 percent of customers want to self-serve without engaging a call center agent, in stark contrast to the 5 percent of customers that prefer human assistance.22

Self-service is not only about providing the level of convenience customers expect from today’s brands. Self-service solutions drive operational efficiencies and cost-savings – frequently cited Forrester research places the cost of a live agent call between $12 and $6, versus $0.25 for an automated response.23

Data – know what your customers desire before they do

There are many sources of customer data, all claiming to be the single source of customer truth. 

Data-driven organizations will leverage the power of data, analytics, and AI to drive competitive advantage by delivering experiences that are not only personalized but proactive and predictive.24

McKinsey is of the view that predictive customer insights will dominate the CX landscape going forward.25 Customer-level data lakes supporting a wide variety of analytic capabilities will fuel an insight engine that can be acted upon in near real-time.

Trust – transparency will earn your customers’ trust

Businesses collect and store massive amounts of customer data. It is therefore not surprising that customers are concerned about the security, privacy, and use to which their data is put.

While governments across the world are working to implement regulations to protect customer data, it will be those businesses that demonstrate transparency, compliance, and strong measures to safeguard their data that will earn their customers’ trust.26

EX – happy employees … happy customers

It may sound clichéd, but happy employees mean happy customers. A 2019 survey established a strong statistical link between employee well-being reported on Glassdoor and customer satisfaction among large sample of some of the largest companies today.27

A more recent study echoed these findings. By focusing on improving employee experience (EX), companies can potentially increase revenue by up to 50% or more, and profits by nearly as much.28  Five key elements – trust, c-suite accountability, alignment, recognition, and seamless technology were identified as supporting a superior EX.

In light of the Great Resignation and the war for talent, unifying both the EX and CX is a strategic imperative.

The Bottom Line

Borrowing from a different time and domain “… it’s the data …”.

The experience economy and superior customer experience are data-driven. 

The focus on predictive systems that provide actionable insight will enable you to better understand what your customers want and need, and perhaps more importantly respond in real time, unlike your competitors.

1 Holiday Shopping Report. (2022, November). Adobe Experience Cloud. https://business.adobe.com/resources/holiday-shopping-report

2 US Consumer Confidence Declined Again in November. (2022, November 29). Cision PR Newswire. https://www.prnewswire.com/news-releases/us-consumer-confidence-declined-again-in-november-301688989.html

3 Gurley, L. K., Pager, T., & Romm, T. (2022, November 29). As rail strike deadline nears, Biden calls on Congress to intervene. Washington Post. https://www.washingtonpost.com/business/2022/11/28/rail-strike-biden-congress/

4 Forrester. (2022, November 21). Customer Experience Planning Guide — Simplify CX Budgeting. https://www.forrester.com/bold/customer-experience-planning-guide-2023/

5 Parrish, R. (2022, November 21). CX Leaders Are Overly Optimistic About Their 2023 Budgets. Forrester. https://www.forrester.com/blogs/cx-budget-in-2023/

6 What is Customer Experience? | IBM. (n.d.). https://www.ibm.com/topics/customer-experience

7 Pine, J. B., II, & Gilmore, J. H. (1997, August 4). How to Profit From Experience. WSJ. https://www.wsj.com/articles/SB870467837649599500

8 Lemon, K. N., & Verhoef, P. C. (2016). Understanding Customer Experience Throughout the Customer Journey. Journal of Marketing, 80(6), 69–96. https://doi.org/10.1509/jm.15.0420

9 Pine II, B. J., & Gilmore, J. (2013). Chapter 2: The experience economy: past, present and future. In Handbook on the Experience Economy (pp. 21–44). Edward Elgar Publishing. https://www.researchgate.net/publication/260917972_The_experience_economy_past_present_and_future

10 From personalization to customerization: Reimagining retail for the new digital age. (2022). Atos SE. https://atos.net/en/lp/lookout-industry-trends/retail

11 Davey, N. (2022, November 25). What should CX leaders prioritise in their 2023 budgets? MyCustomer. https://www.mycustomer.com/customer-experience/engagement/what-should-cx-leaders-prioritise-in-their-2023-budgets

12 The Six Pillars in 2022. (2022, October 20). KPMG. https://home.kpmg/xx/en/home/insights/2022/10/global-cee-2022/the-six-pillars.html

13 Miller, I., Neher, K., Broek, R. V. D., & Wintering, T. (2022, March 21). Six customer experience pitfalls to avoid. McKinsey & Co. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/six-customer-experience-pitfalls-to-avoid

14 Customer Experience Success: 3 Key Tactics to Employ. (2022, May 25). Gartner. https://www.gartner.com/en/articles/these-3-factors-are-key-to-customer-experience-success

15 Forrester. (2022, November 21). Customer Experience Planning Guide — Simplify CX Budgeting. https://www.forrester.com/bold/customer-experience-planning-guide-2023/

16 Taking a design-led, data-driven approach to experience transformation. (2022). In IBM. IBM Corporation. https://www.ibm.com/downloads/cas/8PN5D6GL

17 Generating Stronger Business Outcomes Through Customer Data. (2022, September 23). Harvard Business Review. https://hbr.org/sponsored/2022/08/generating-stronger-business-outcomes-through-customer-data

18 BusinessWire. (2022, November 29). Acxiom Forecasts Top Five Customer Experience Trends for 2023. MarTech Cube. https://www.martechcube.com/acxiom-forecasts-top-five-customer-experience-trends-for-2023/

19 Bleu, N. (2022, August 29). 29 Top Chatbot Statistics For 2022: Usage, Demographics, Trends. Blogging Wizard. https://bloggingwizard.com/chatbot-statistics/

20 Zendesk. (2013, January 10). Self-service: do customers want to help themselves? https://www.zendesk.nl/blog/searching-for-self-service/#georedirect

21 Kick-Ass Customer Service. (2020, September 15). Harvard Business Review. https://hbr.org/2017/01/kick-ass-customer-service

22 The State of Self-Service Content Experiences. (n.d.). Zoomin Software. Retrieved November 30, 2022, from https://www.zoominsoftware.com/ebooks-success-stories/the-state-of-self-service-content-experiences

23 How digital self-service benefits your entire business. (2020, June 9). CloudSense. https://blog.cloudsense.com/digital-self-service-benefits

24 Taking a design-led, data-driven approach to experience transformation. (2022). In IBM. IBM Corporation. https://www.ibm.com/downloads/cas/8PN5D6GL

25 Prediction: The future of CX. (2021, July 12). McKinsey & Company. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/prediction-the-future-of-cx

26 Lowe, C. (2022, August 19). Customer Experience Trends: 12 to Explore in 2023. Insider. https://useinsider.com/customer-experience-trends-to-explore-in-2023/

27 The Key to Happy Customers? Happy Employees. (2019, August 19). Harvard Business Review. https://hbr.org/2019/08/the-key-to-happy-customers-happy-employees

28 The Experience Advantage: Transforming Customer and Employee  Experience for the Future of Work. (2022). In Salesforce. Salesforce, Inc. https://www.salesforce.com/form/conf/the-experience-advantage/