What is customer experience (CX)?
Customer experience creates an emotional bond that helps companies capture more customers, deepen customer loyalty, and increase customer lifetime value.
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What is customer experience (CX)?

By strict definition, customer experience, or CX, is the sum or aggregate of customers’ perceptions and feelings resulting from all their interactions with a business or brand. It’s this sense of the term that’s reflected in phrases like X Corp provides a consistently great customer experience, or Y Corp’s balky web site undermines their overall customer experience.

Frequently, however, customer experience 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. This second sense of the term is reflected in phrases like I work on our company’s CX team or we hired a customer experience consultant.

Customer experience seeks to differentiate a company and its value proposition from competitors based on human factors—such as how well the company’s customers are feel they are understood, served and treated—rather than through product or service features, performance, pricing and delivery. 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 will realize from each customer acquired.

Good or great customer experience can maximize customer lifetime value (CLV) by deepening customer loyalty, improving customer retention, and generating more and larger sales to customers. It can also drive growth, through acquisition of new customers resulting from existing customers’ word-of-mouth and online advocacy for the brand. 

Today, the importance of customer experience is difficult to overestimate. According to industry analyst Gartner, two-thirds of companies compete based on customer experience (link resides outside of ibm.com). 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 ibm.com). And industry analyst, IDC Corp., projects that spending on customer experience technologies will reach USD 641 billion in 2022 (link resides outside ibm.com).

Key customer experience concepts

Customer centricity

The essential first step for a business moving 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, and acquiring as deep an understanding as possible of what each prospective and actual customer is seeking at each stage—or even during each interaction—of the relationship.

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

But the transition is worth the effort, because while the customer may not always be right in the literal sense, customers are never wrong about how they feel after interacting with a company. A bad customer experience—a late delivery, a misunderstanding with the customer support or customer service team—can make customers feel, however unreasonably, like they’ve been singled out specifically and intentionally for poor treatment. One recent survey found that one in six customers would abandon a purchase after just one bad experience, and 86% of customers will leave a trusted brand for good after just two or three bad experiences (link resides outside ibm.com).

In contrast, a positive customer experience can leave customers feeling like a company exists just for them—and more important, 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 ibm.com).

Customer personas

A customer persona, also called 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, an expert skier, or even the parent of a child getting into skiing or snowboarding.

Personas are created based on data from a variety of sources—purchasing behaviors, web analytics, surveys, ratings and reviews, social media posts—as well as on feedback and insights from interaction with customer service and support teams. The goal of creating personas is the help the company visualize the wants and needs of people in each customer segment at the various stages of the customer lifecycle.

Customer journey mapping

Buyer personas are the starting point of a customer experience management program. The next step customer journey mapping: Defining and then optimizing the interactions, or touchpoints, that each persona has throughout the customer lifecycle, from the first time the customer learns of and engages with the company, to the process of making an initial purchase decision, through their ongoing use of the product or service and decision to make additional purchases and or abandon the company.

The assumptions behind customer journey mapping are 1) that prospects or customers are purposeful at each touchpoint—trying to solve a problem, answer a question, compare options, cross something off a to-do list, etc.—and 2) that the company can keep these people on their journies to becoming loyal customers by helping them achieve those purposes as quickly, simply, smoothly and satisfyingly as possible.

Customer journey mapping needn’t always be exhaustive. The goal 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.

Elements of customer experience strategy

The “heavy lifting” of CXM is to re-orient 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 follow are several key elements of an effective customer experience strategy (CX strategy) and the technologies that drive them.

Omnichannel approach

CX 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 own 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, the ecommerce experience and more
  • Direct contact including face-to-face contact in a retail setting and phone contact 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 extend 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 vs. the phone, or purchase via the app vs. ecommerce site, they should be able to do those things. The customer experience should meet them wherever they are.

Customer self-service

Providing a phone number, or offering a form customers can fill to have a representative get in touch—these are no longer components of an acceptable customer experience. Customers want to help themselves to 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
  • 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. For example, according to Forbes (and reflecting the feelings of many), 39% of respondents to a recent customer survey indicated they would rather clean a toilet than engage with an interactive voice response (IVR) system (link resides outside ibm.com). CX teams mest be careful to prioritize the needs and wants of the customer over shiny new technical toys.

Personalized experiences

Personalized experiences are interactions, services or products 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 web site, app or chatbot that greets the customer by first 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 artificial intelligence (AI). But others require simpler technology—e.g., a web ‘splash page’ that simply asks a customer, ‘what are you here for today?’ And still others require no technology at all—like Coca Cola's bottles labeled with people’s first names, enabling a customer to give a friend a personalized drink.

Regardless of how its 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 ibm.com).

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 (link resides outside ibm.com) agreed that improved employee experience results in ‘a better customer 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.

Cross-functional collaboration

Successful customer experience management initiatives break down organizational silos, share information in new ways and, perhaps most importantly, share responsibility for customer experience and customer satisfaction. Companies committed to customer experience often unify customer data across disciplines— sales, marketing, 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. In fact, according to industry analyst Gartner, by 2019 just 11 percent of companies lacked a CXO (link resides outside ibm.com).

Feedback and metrics

Customer experience requires collecting and processing feedback and measurement as part of the everyday business process, vs. 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 offered after a touchpoint experience.
  • Net Promoter Score (NPS): Developed by the consultancy Bain and Company, NPS asks users who have just 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, which 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 very best CX performers will 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.
Customer experience vs. CRM

CRM, or customer relationship management, is the practice of collecting, tracking, analyzing and acting on data resulting from customer interactions throughout the entire customer lifecycle. CRM also refers to a category of software systems, such Salesforce.com or SAP, used to simplify and automate this practice.

The first CRM systems, which existed before the advent of the Web, could 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 their own advanced technology for creating and delivering experiences based on customer data.

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