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How Customer Experience Affects Profitability

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Defining Customer Experience

Customer Experience is the analysis and design of the process by which a customer buys from your company. Its objective is to improve sales and customer satisfaction.

Customer Experience is lived by the customer in the process of searching for and acquiring a product or service. It is facilitated by the company’s investment in:

  • Customer journey mapping and analytics.
  • Designing the experiential platform.
  • Providing a satisfying customer experience.
  • Continuous innovation.

As a discipline, Customer Experience Management includes a thorough monitoring of the company’s touch-points and implementing continuous improvement tactics.

Digital Transformation and Customer Experience

Customer Experience (CX) is an integral part of the digital landscape. Digital Transformation has allowed for companies to track customer behavior in a sophisticated and detailed manner.

A Chief Marketing Officer (CMO) will oversee Customer Experience until it becomes so complex or so important to a company’s leadership that a Customer Experience Office (CXO) is established. The CXO will coordinate with marketing and digital teams (internal and outsourced) to improve the company’s performance at every milestone and touchpoint. To do so, she or he will be able to choose from a wide variety of tools and services, some of which are:

  • Voice of Customer Tools
  • Campaign Testing Tools
  • Web analytics
  • Content Marketing
  • Site Search and Discovery
  • Dashboard Services
  • Artificial Intelligence
  • Loyalty and Advocacy Marketing

Good Customer Experience, Bad Customer Experience

As companies grow they face new challenges associated with dealing with more customers pertaining different issues. For a company to exist there needs to be a product that people decide to purchase. There has to be an actual way of procuring and using it.

In today’s world, someone in need of said product/service will get to choose among a set of options in the market. She or he will evaluate access, price, scarcity, status, service, aesthetics and flow (ease) to decide whether to purchase one or another and of great importance, if she or he will purchase again.

In the world where people want everything easy and now, CX is king.

The following wizard will help you get started with a customer experience assessment for your company.

Measuring Customer Experience

Customer Experience may be measured both quantitatively and qualitatively, objectively and subjectively. As researchers and engineers we are interested in both the detailed tracking of the touch points and customer-facing milestones of the company’s operations.

The goal is to implement a holistic data strategy and architecture where we monitor every interaction for the sake of providing and capturing value in every interaction. We want to follow every step of the customer journey and we want to know how our customer feels about it.

Different marketing models will map customer experience steps differently. The most commonly used framework analyses the customer journey in 5 steps:

  • Awareness
  • Consideration
  • Convert
  • Loyalty
  • Advocacy

Each one of these steps may be assigned general or specific KPIs [ie, setting up an intelligent Customer Journey KPI system]. In this article we would like to use a temporal model to define our KPI strategy. We can evaluate our customer experience by understanding what happens before the purchase, during the purchase and after the purchase.

Before- CPA: the complex process by which a customer arrives at a product/service may be summed up as Cost Per Acquisition.

During- Conversion Rate and Cycle: optimizing the close of the sale by understanding customer preferences and establishing the best tools to reduce sales cycles and increase profitability.

After- Customer Retention: the income generated from repeat customers is as important as the one generated from new customers. New customers happen as a result of marketing and branding. They successfully presented an option to a customer in need or want. A repeat purchase is a validation of the product/service. It will only happen if the customer is satisfied and will not include a direct cost of acquisition. It could include other associated marketing and promotion costs.

4 Key Strategic Takeaways about Customer Experience

Understand Data Analytics through the lens of Customer Culture: it is always useful to understand what drives your customer beyond what you offer them. Customer Culture encompasses everything that makes the identity of the customer. Their habits, rituals, beliefs, values and jargon make up their culture. By better learning how our products/services interact with their routines we can increase the value of our offer. Adding a layer of qualitative analysis to the available data is a source of extraordinary insight to improve customer satisfaction and develop customer-oriented innovation.

Approach Branding Through the Lens of User Experience (UX): a great way to build equity for your brand is by investing in UX. UX is effectively the manifestation of your brand. If your customer has a successful purchase and in the meantime felt confortable with the process, you have done your job. They are now likely to become an advocate for your company.

Optimize Content by using Voice of Customer Tools: your content shouldn’t be static. In today’s world the way to update it is by engaging in meaningful conversation with your audience. One of the secrets to engagement is to listen first. When you know what is ticking your customer it is likely they will be more enthusiastic to engage. The challenge is to be able to sustain a conversation with your customers in an interesting and constructive way.

Start with 3 Key Metrics: Cost Per Acquisition, Customer Satisfaction, Profitability: depending on the complexity of your customer journey map you will be able to determine as many KPIs as needed. Initially, you can focus on 3 in particular. CPA or Cost per Acquisition is the general metric that describes everything that had to happen for that customer to become your client. Your company had to reach out to them, set up an infrastructure to be able to respond when they call on you and compete against your competition. All if this is captured in CPA, which can be monitored through sales and marketing cost per unit and directly when evaluating funnels and campaigns in digital.

Customer Satisfaction may be measured by asking directly if your customers are satisfied with your product/service or any portion of it. It may also be assessed through quantitative parameters like percentage of income from repeat customers and organic reviews on platforms and marketplaces.

The end goal of customer experience management is to increase sales and profitability. CPA will help us understand both. The lower our CPA the more profitable we will be. CPA is also bound to decrease with an increase in Customer Satisfaction, both because of the direct (repeat purchases) and indirect (referrals) effects. It is observable how a focus on the customer will continuously generate for value through customer retention and new product innovation.

Ethical Consideration about Customer Experience in the Digital Era

There has been substantial political debate about the production and commercialization of customer data in the digital age. National and international codes are regularly updated as information technology continues to evolve and as it slowly but surely migrates to the cloud. Debate occurs because society is still determining what makes for proper use of the information generated in the internet. There is also the question of ownership of said info and under what method may it be sold. And when sold, what taxes if any should it generate.

Currently, international law is requiring companies to abide by certain standards that are usually found in privacy policies and terms of use. In the past years new norms are being implemented as is GDPR and consensual cookie policy. This is all happening while companies are developing new products and services that are built on data. Internet is built on shared data. To digital natives this is a clear notion. Yet many are in favor of regulating the internet with a firm hand, against those who would like to see the internet as “free” as possible. These preferences are significantly permeated by the current political debate: freedom vs safety.

JD Rico is the founder of Holistics and Partner and Editor of the Digitalist Hub. He is a researcher and entrepreneur in the topics of Business Intelligence, Digital Media and Venture Capital. He holds degrees in Anthropology (BA), Economics (BSc), Project Management- Innovation (MSc), Cultural Studies (Min) and Artificial Intelligence Product and Service Design (Cert.). He serves at the board of companies in Emerging Tech, Wellness, Food Tech and Cultural Impact. He writes Cap∙Hackers, a newsletter for 33,000 business owners and investors.

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