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Beyond the Buzz: Customer Experience

05 July 2023
Ida Lorenz
People in a mall

53% of Early Digital Adopters say customer experience has become a priority for their business in the last 12 months. According to Foundry's 2023 study, this figure rises to 93% among Advanced Digital Adopters, highlighting customer centricity as a critical foundation for a successful digital revolution.

The term customer experience (CX) is ubiquitous today. It is used across channels and contexts. Marketing strategies are increasingly focused on building an emotional connection with customers through an exceptional customer experience. But what does this term really mean?

Both customer experience and product experience are widely discussed in the marketplace. At their core, both terms revolve around the experiences and interactions customers have with a company or brand. The customer journey encompasses all the touchpoints a customer goes through to make a purchase decision. Customer experience refers to the totality of subjective evaluations of these touchpoints. In addition, delivering an outstanding customer experience requires an appealing product experience, as it includes the presentation and use of a product in its evaluation.

Investing in this area pays off. A positive customer experience can become a significant competitive advantage for companies. According to a PwC study, 73% of customers are willing to pay more for a product or service if they have a good CX experience.

The Impact of Customer Experience

Customer experience has a significant impact on a company's success. Those who prioritize optimizing the customer experience and leveraging data can increase customer loyalty, leading to revenue growth and competitive advantage.

  • Accenture research shows that 91% of consumers are more likely to buy from companies that recognize them, remember them, and provide relevant offers and recommendations.
  • Companies that deliver a personalized customer experience experience an 80% increase in customer loyalty, according to a study by Epsilon.

The quality of the customer experience is determined by the customer's subjective evaluation, whether positive or negative. It is the responsibility of vendors to steer these reviews in a direction that

  • First, leads to a purchase,
  • Second, contributes to long-term customer loyalty to the brand or product, and ideally,
  • Third, leads to customers acting as influencers or advocates through positive reviews.

Customer Experience in Action: Innovative Store Concepts at Douglas and Adidas

To illustrate the importance of a targeted customer experience, let's take two examples: the Douglas Experience Store in Berlin and the Adidas store in London. Both stores use innovative approaches to offer their customers a unique shopping experience.

Douglas

The Douglas experiential shop in Berlin is a modern digital beauty temple. Here, customers can interactively experience the latest product innovations. In addition to an expanded product range, the shop features a click & collect station for online customers, a beauty lounge for professional hair and makeup styling, and a fragrance bar for personal consultations. There's even an influencer room that serves as a retreat for bloggers to share updates on the product line directly through various social media channels.

Adidas

On the other hand, the Adidas Future Store in London offers more than 100 digital touchpoints on four levels. Customers have the opportunity to experience the product in different ways. Interactive mirrors have been installed in the fitting rooms that recognize the products customers are trying on and provide relevant information. For example, different sizes or colors can be requested without leaving the fitting room.

These two examples impressively demonstrate how traditional retail spaces can be enhanced by integrating online and offline elements. It is clear that increasing digitalization also enables greater personalization. The data collected during in-store interactions can be accurately analyzed and used to provide even more tailored feedback to the customer.

These innovative store concepts highlight the added value of a targeted customer experience that puts the customer at the center and enables unique experiences. By combining digital and physical elements, companies can better understand their customers, meet their needs and build long-term relationships.

What Are the Benefits of a Positive Customer Experience?

Customers have high expectations for service and offerings from companies, and their expectations are often not met. According to a PwC study, 54% of respondents believe that the customer experience at most companies could be improved. Until now, many companies have not worked across departments to improve the quality of their customer interactions. Marketing, support, and sales all work separately to improve the customer experience.

By investing in customer experience management, companies can achieve many benefits, including

The Emotional Connection to the Product, Service, and Ultimately the Brand

The overarching goal of customer experience is to create unique, personalized, contextual, and most importantly, targeted customer experiences. Ideally, this relationship spans all points of interaction between customers and companies or products. This includes the website, customer support, product reviews, and delivery and returns.

This sounds like a mammoth project that will take years to complete, leaving you with a sense of "where do I even begin? Our years of consulting experience show that even sub-disciplines of customer experience can create profitable value for many companies. Sub-projects make it easier to get started and help strengthen the perception of CX within the company through "small" wins. And ideally, they free up additional resources and funding to support the programs.

The following initiatives provide a starting point for improving customer experience through sub-projects:

Every business is unique, so it is important to develop a tailored CX strategy that is specific to the target customers and business objectives.

WHAT EVERYONE WANTS, BUT FEW ACCOMPLISH

Creating Customer Experience that Delights and Elevates Customer Loyalty to a New Level

Data Management as the Foundation for Customer Loyalty

An important first step in creating the foundation for a customer experience is internal alignment. Data management plays a central role in this process. Sales data such as sales figures, marketing data such as product descriptions and images, and technical information are valuable resources. All available data is like "gold" for a company. The better a company can control the quality and availability of this data, the better it can transform and leverage it into relevant customer data.

AI and machine learning can help make sense of customer data and personalize every customer interaction. In the context of customer and product experience, there are three types of data:

  1. Operational data: This data relates to the operational aspects of the business and includes master data (e.g., customer data, material data), transactional data (e.g., sales figures, return rate), and inventory data (e.g., inventory levels, sales figures). They are primarily focused on the past.
  2. Product data and media assets: This data is important for presenting products or services and includes textual descriptions (e.g., technical information, product features), category information, and visual representations (e.g., images, video clips).
  3. Experience Data: This data helps to understand how the company is perceived by customers. It provides insights into customers' experiences and attitudes, such as their views on new product features.

The significant potential of digitization lies in the integration of these three types of data. Unfortunately, few companies currently collect experience data, and even fewer link it to product or operational data. Only by combining and deriving useful insights can the full business potential be realized.

Only by understanding customer expectations through experience data can you tailor the extraction of product data to meet those needs. Sales figures (operational data) allow you to measure whether these activities are meeting customer expectations or need to be adjusted.

Inside of a mall

No Personal Data = No Personalization

In addition to the personal information companies collect based on customer history (operational data), they have other data sources that provide insight into user interests during the purchase process:

  • The device the user is currently using: device, operating system, browser
  • The user's location: shopping mall, university, residential area
  • Where the user came from: Facebook, Google, newsletter, etc.
  • When the user is looking for information: day of the week or time of day

By combining this data with artificial intelligence and machine learning, patterns can be identified. This enables a contextual approach to the customer during the interaction. For example, a customer surfing the web on a laptop on a Sunday evening will be presented with different information than a customer using a smartphone on the subway on a Monday morning.

CDP - a trusted foundation for customer data management

What is needed is a central system that can manage all customer data and digital assets and automatically distribute the data across interfaces. In our opinion, the Customer Data Platform (CDP) is the best solution for this task.

In today's digital age, Customer Relationship Management (CRM) and Customer Data Platform (CDP) play a critical role in managing and analyzing customer data. Both enable companies to build a central customer database that provides a 360-degree view of each customer. A key difference is that CRM focuses primarily on building and maintaining good customer relationships. It serves as a central database for master data and, for many companies, also enables communication with potential customers. CRM captures and manages information from direct customer contact to provide a complete picture of customer interactions.

The CDP, on the other hand, focuses primarily on data collection and analysis, ideally automated. It enables the consolidation of disparate records from multiple sources, such as transactional data, email interactions, or customer support histories, to create rich and specific segments for targeted marketing campaigns, for example. An important feature of the CDP is the collection of behavioral data, which is often neglected in CRM. For example, website tracking data is not typically captured in CRM, but is essential for a CDP.

A CDP is not an all-in-one solution, but rather a central data platform that serves as a data source for other systems. The customer record generated by a CDP can be seamlessly integrated into CRM, email marketing tools, data analytics platforms, and advertising platforms.

Overall, CRM and CDP complement each other in terms of functionality. While CRM focuses on customer relationships and provides a variety of communication capabilities, the CDP enables comprehensive data analysis and segmentation to make personalized marketing more effective. The combination of the two systems can help companies better understand their customers, develop more effective marketing strategies, and ultimately build long-term relationships based on relevant and tailored communications.

The goal of a CDP is to collect, manage, and analyze data to improve the effectiveness of marketing and sales activities and create a personalized customer experience. However, this can only be achieved if customer data is reliably collected and analyzed within the organization. Dividing data processing into three phases illustrates the optimal approach:

Insights have been gathered (past)
  • How did the customer decide in previous cases?
  • At what touchpoint did they decide to buy?
Insights are being gathered (present)
  • How does the customer decide now?
  • Evaluation of e.g. recommendation engines in the shop
Outcomes are predicted (predictive - the ultimate discipline)
  • How will the customer decide in the future?
  • Using artificial intelligence and machine learning to predict how a customer will react.

Defined personas and target groups based on customer needs then create a personal and emotional approach. However, this requires that the information about the respective products in the PIM system (or a comparable software solution) is complete, up-to-date, and enriched with media such as images and video clips. Only then can a product be optimally presented and staged for the customer. This is the prerequisite for an immersive customer experience.

People from above

The Importance of a Great Product Experience

Products and services alone are no longer enough. The reason is that they are increasingly commoditized and therefore comparable. Thanks to the Internet and smartphones, we can quickly find the product we want, buy it at the best price, and have it delivered promptly. Whether as consumers or in the B2B sector, we are all looking for experiences. Ideally, these experiences are memorable.

To illustrate this, let us take the example of the coffee bean and examine why the product experience is closely linked to the customer experience.

From Raw Material to Finished Product: The Coffee Bean Value Chain

The value chain of the coffee bean begins in agriculture, where price, not brand or functionality, is the focus. The trade in the raw material and the subsequent industrial mass production of roasted coffee beans transform it into a commodity. At this stage, the end consumer already perceives added value through perceived quality or an established brand. This added value is further marketed by offering a service, such as serving a cup of latte macchiato in a café.

In the past, customers were primarily concerned with saving time. The coffee beans were already roasted and the coffee was ready to be served. But in today's service-oriented society, products and services alone are no longer enough to compete. Customers increasingly value experiences. For example, the coffee bean is no longer simply brought out of the kitchen, but the preparation is elaborately orchestrated by the barista in front of the customer to present an individually crafted coffee.

At this point, the customer is no longer concerned with saving time, but with ensuring that the time spent is well spent. At this point, the customer experience becomes a distinct economic proposition, and the customer is willing to pay for it. The longer they stay in a space (whether it's a coffee shop, an online store, or a physical store) with a positive feeling, the more likely they are to spend more money.

We now live in an experience economy, where every retailer, manufacturer, and brand are competing for the time, attention, and money of every customer. It is no longer about how to save time, but how to spend precious time in a fulfilling and experiential way. The distinction between service and experience is critical.

To illustrate, here are two examples:

  • Uber provides a great experience when you ride with them. Ultimately, however, it is primarily a way to save time. You can book a driver at any time through the app and pay before the ride starts. All the customer has to do is get out of the car.
  • Another example is Airbnb. Through this platform, you can book accommodations that are tailored to the customer. Different experiences can be added during the booking process, such as a canal tour when traveling to Amsterdam. This also saves time.

Identify Opportunities and Engage Customers

In uncertain economic times, companies evaluate their planned investments to set the right priorities. Unfortunately, many overlook the customer experience. Now is the time to deepen relationships with customers, especially influencers. An emotionally engaging customer experience is essential to building customer loyalty.

Companies need to recognize that the value customers attach to a brand is not only based on the quality of the product or service, but also on the experience they have. By creating unique and memorable experiences, companies can retain customers and build long-term relationships.

To implement a customer experience strategy, it is critical to identify the opportunities within your own organization and understand the benefits to the customer. This can be achieved through emotional shopping experiences, quality, additional services, time savings, or advice. The focus should be on the customer and not, as has often been the case in the past, on the company's product portfolio that needs to be sold.

A tailored CX strategy is key to meeting customer needs and expectations. In these turbulent times, companies should recognize their opportunities to exceed customer expectations and deliver a memorable experience. In doing so, you will not only create satisfied customers, but also loyal brand advocates with whom you can build long-term business relationships.

Now is the time to rethink your investments and ensure that the customer experience is at the center of your efforts. By deepening your relationships with your customers and understanding their needs, you will emerge stronger.

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