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What is CX?

Customer experience, or CX, is a holistic account of customers’ perceptions that result from all their interactions with a business or brand, whether online or in store.

Customer experience involves customer experience management (CXM). CXM refers to strategies, technologies, and practices for improving business results by creating an ideal experience for anyone interacting with a company.

Customer experience creates an emotional bond that helps companies build a competitive advantage by capturing more customers, deepening customer loyalty and increasing customer lifetime value.

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How customer experience creates a competitive advantage

Customer experience differentiates a company and its value proposition from competitors based on human factors—such as how well the company’s customers feel they are understood, served, and treated. The goal of this differentiation is to form an emotional bond with the customer that maximizes the lifetime value of the customer—the ultimate profit the company realizes from each customer acquired. Strengthening their relationship with customers strengthens their bottom line. Customer experience can generate on average three times in returns to shareholders, according to McKinsey (link resides outside of ibm.com)1

Good or great customer (link resides outside of ibm.com) experience can maximize a customer lifetime value (CLV) by deepening customer loyalty, improving customer retention and generating more and larger sales to customers. It can also drive brand reputation and bottom-line growth. These results from existing customers’ word-of-mouth and online advocacy for the brand can lead to the acquisition of new customers.

Today, the overall customer experience’s influence is difficult to overestimate. According to industry analyst Gartner (link resides outside of ibm.com)2, two-thirds of companies compete based on customer experience. Standard & Poor’s research among IT executives (2021) found that improving customer experience was voiced as the single most important driver of digital transformation (link resides outside of ibm.com)3. Nearly 65% of CX leaders anticipate larger budgets in 2024 for CX initiatives, according to Forrester (link resides outside of ibm.com).4

Elements of customer experience strategy

Customer centricity

The essential first step for a business shifting to a customer experience focus is to place the customer’s perceptions and feelings in the driver’s seat of the relationship. This includes basing the business’ brand promise on an understanding of its customers’ needs and emotions. Getting there means acquiring as deep an understanding as possible of what each prospective and existing customer is seeking at each stage—or even each interaction—of the relationship.

For many companies, this is a significant transition. It typically requires support from the boardroom and executives down to the employees. It can be a difficult adjustment for executives and managers whose careers have not been customer-centric or who historically found success by focusing first on transactional metrics or financial KPIs. And, as noted before, it involves a substantial investment in new technologies, from mobile apps to payment processing to advanced analytics and artificial intelligence (AI).

A bad customer experience—a late delivery, a misunderstanding with the customer support or a contact center, or any other pain point—can make customers feel, however unreasonably, like they’ve been intentionally singled out for poor treatment.

In contrast, a positive customer experience can leave customers feeling like a company exists just for them and, more importantly, it can leave them feeling generous. According to PwC, 65% of consumers feel a positive experience with a brand is more important than good advertising. The same survey revealed that customers would pay up to 16% for a great experience (link resides outside of ibm.com).5

Customer journey mapping

Buyer personas are the starting point of a customer experience management program. The next step in customer journey mapping involves defining and then optimizing the interactions throughout the entire customer journey. Companies need to observe the touchpoints that each persona has throughout the customer lifecycle. This starts with the customer learning of the company, moves through the process of making an initial purchase decision, goes into their ongoing use of the product or service and includes the decision to either make more purchases and or abandon the company.

The assumptions behind customer journey mapping are that prospects or customers are being purposeful at each touchpoint—trying to solve a problem, answer a question, compare options, or cross something off a to-do list. This means that the company can keep these people on their journeys to becoming loyal customers by helping them achieve those purposes as quickly, simply and satisfying as possible. Companies often create customer success teams to guide their most important customers through this process.

The goal of customer journey mapping is to deliver actionable insights for developing a customer experience strategy. Rather than completing an end-to-end map of every customer touchpoint for every persona, the initial goal might be to focus on the touchpoints where a company is most clearly underperforming or on the personas that offer the greatest upside.

Customer personas

A customer persona also called a buyer persona, is a fictional or semi-fictional character who represents a significant segment of a company’s customers or potential customers. For example, a company that manufactures skiing and snowboarding equipment might create personas representing a novice skier, an intermediate snowboarder or an expert skier or the parent of a child getting into skiing or snowboarding.

Personas are created based on data from various sources. Factors such as purchasing behaviors, web analytics, surveys, ratings and reviews, social media posts and interactions with customer service and support teams can all influence personas. The goal of creating personas is to help the company visualize the wants and needs of people in each customer segment at the various stages of the customer lifecycle.

Customer relationship management

It is the practice of collecting, tracking, analyzing, and acting on data resulting from customer interactions throughout the entire customer lifecycle. Customer relationship management (CRM) also refers to a category of software systems that are used to simplify and automate this practice.

The first CRM systems, which existed before the advent of the internet, might be considered the first customer experience management systems—they were used by sales and customer service teams to optimize and personalize direct customer interactions (face-to-face or via telephone, email, or direct mail). Today CRM systems serve as an essential data source for all elements of an organization’s customer experience strategy. Many CRM systems also include advanced technology for creating and delivering experiences based on customer data.

How to improve customer experience

The “heavy lifting” of customer experience management involves reorienting all aspects of the enterprise to a tight focus on anticipating and meeting not just a customer’s needs, but their emotional wants, to deliver a truly great customer experience. Winning the customer’s heart is what creates brand loyalty, reduces customer churn and maximizes lifetime value.

What follows are several key elements of a good CX strategy and the technologies that drive them.

Cross-functional collaboration

Successful customer experience management initiatives break down organizational silos, share information in new ways and most importantly, share responsibility for customer experience and customer satisfaction. Companies committed to customer experience often unify customer data across (link resides outside of ibm.com) disciplines—sales, marketing, and (link resides outside of ibm.com) customer support—to create a single source of truth about customers. And most appoint a C-level executive, typically a customer experience officer (CXO), with the authority to make departments work together on cross-functional issues that impact customer experience.

Customer self-service

Providing a (link resides outside of ibm.com) phone number or offering a form that customers can complete to connect with a representative—these can no longer be the only way to help customers get answers. Customers want to help themselves to find the information, answers, and support they need.

Frequently asked questions (FAQs), knowledge bases and customer forums are just a start. Increasingly customer expectations include

  • Ability to engage customer service and support teams via online chat or SMS text messaging
  • Ability to schedule appointments using online tools (and without making a phone call)
  • Information in context—for example, product pages populated with brochures, product manuals, detailed specs, how-to videos and other pertinent information (link resides outside of ibm.com) 
  • Optimized search that enables customer to quickly find answers to their questions
  • Customer self-service is one area where not all automation is good automation

Customer experience teams must be careful to prioritize the needs and wants of the customer over shiny new technical toys.

Employee experience

Most organizations find that improving customer experience ultimately requires a parallel program that enhances your employees’ experience—enhancing the user experience and performance of the tools employees use to interact with and serve customers. 85% of respondents to a recent IDC survey agreed that improved employee experience results in “a better customer (link resides outside of ibm.com) experience, higher customer satisfaction and higher revenues for their organization.”In the same survey, 58% indicated that customer satisfaction is a key metric for evaluating employee productivity—so it seems only fair that employees should have the best possible tools and experience for meeting customer expectations.

Omnichannel approach

Customer experience strategy should encompass all channels of customer engagement and communication, including

  • Traditional media messaging, such as print, video and audio advertising and PR
  • Social media messaging—not only the company’s social media channels, but also customer comments and reviews on third-party blogs or web sites
  • Digital experiences such as the corporate web site, mobile apps, chatbots, ecommerce experience and more
  • Direct contact including face-to-face contact in a retail setting and phone contact involving customer support and customer service teams

The messaging and experience should be as consistent as possible across channels so that prospects and customers move seamlessly from one channel to another as if it were all part of the same experience. To the greatest extent possible, customers should be able to accomplish as much and as many of their goals in the channel of their choice—e.g., if they choose to get customer support through social media versus the phone or purchase via the app versus ecommerce site, they should be able to do those things. The customer experience should meet them wherever they are.

Personalized experiences

Personalized experiences are interactions, services, or products that are tailored to meet a customer’s specific wants, requirements, purposes, likes, or even personality. Examples of personalized experiences include (but are by no means limited to)

  • A website, app, or chatbot that greets the customer by given name
  • A customer support hand-off that doesn’t ask the customer to repeat data already provided
  • Recommendations based on previous product purchases (or videos viewed)
  • A follow-up email or text message after a purchase to ask how the product is performing or provide how-tos or other useful product information

Many personalized customer interactions involve powerful technologies such as advanced analytics, automation, and generative AI. In fact, the IBM Institute for Business Value found that 85% of execs believe that generative AI will be used to interact with customers directly in the next two years.

But others require simpler technology—for example, a web ‘splash page’ that simply asks a customer what they want to do. And still others require no technology at all—like Coca-Cola's bottles that are labeled with people’s given names, enabling a customer to give a friend a personalized drink.

Regardless of how it is implemented, personalization is increasingly seen as table stakes for a good customer experience. A recent study by McKinsey found that 71 percent of customers expect personalization and 76% of customers get frustrated when they don’t find it (link resides outside of ibm.com).7

How to measure customer experience

Customer experience requires collecting and processing feedback and measurement as part of the everyday business process instead of periodically or as a special project. Companies typically deploy technologies for capturing customer feedback and measuring satisfaction in real time. Common metrics include:

Customer satisfaction (CSAT) score

CSAT is the percentage of respondents who claim to be satisfied (4) or very satisfied (5) in surveys that are offered after a touchpoint experience.

Net Promoter Score (NPS)

Developed by the consultancy Bain and Company, NPS asks users who have experienced a touchpoint how likely they are to recommend the company to others. The number of low scores (6 or less) is subtracted from number of “promoters” (9’s and 10’s) and the net is converted into a percentage. This percentage can range from -100 (all 6’s or less) to +100 (all 9’s and 10’s). Earning a positive score is typically the first goal, while the best performers attain NPS scores of 80.

Customer Effort Score (CES)

After a touch, the customer is asked how easy or difficult it was to accomplish their goal, rating the difficulty from 1 (easy) to 5 or 7 (difficult). Increasingly CES is viewed as a better predictor of genuine customer loyalty than surveys that score satisfaction levels.

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1 What is CX? (link resides outside of ibm.com), McKinsey, August 17, 2022 
2 and 3 Customer Experience Focus Can Improve Equity And Credit Performance (link resides outside of ibm.com), S&P Global, September 16, 2021
4 Planning Guide 2024: Customer Experience (link resides outside of ibm.com), Forrester
5 Ingredients for Great Experiences (link resides outside of ibm.com), PWC
6 Employee Experience and Customer Experience (link resides outside of ibm.com), IDC, September 17, 2021
7 What is personalization (link resides outside of ibm.com)? McKinsey, May 30, 2023