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January 11, 2011

The marketing value of customer experience

by Josh Bernoff

Customer experience is marketing. That is, in a world drenched in social word of mouth, the way you treat your customers -- and the way they perceive you -- makes all the difference in what they say to their friends.

With that in mind, I'd like to share some key results from Forrester Research's latest Customer Experience Index survey. We asked over 7,700 consumers to respond to three questions about 154 different companies: how well did they meet your needs, how easy were they to do business with, and how enjoyable were they to do business with? The results are fascinating.

  • Only 6% of the brands were ranked as excellent (score 85 or more out of 100). And two-thirds were rated "okay" to "poor". 18% were poor. Social technology is going to hammer these brands.
  • Retail and hotel companies did the best, health insurance and TV service providers ranked worst. I find this interesting. The cost of great experience in the retail and hotel business is very high, they are people intensive businesses where it's easy to fail. And yet the companies that succeed here succeed in part based on great service -- because they compete. In health insurance and TV service, there is far less competition. Some companies, like Comcast, now provide service guarantees. But the customers haven't caught up to the changes.

The best performers overall were Borders, Barnes & Noble, Kohl's, Costco, Amazon, JCPenney, Walgreens, Target, BJ's Wholesale Club, and USAA (credit cards). The top two companies are in trouble right now -- a great experience by itself doesn't make up for an industry facing digital disruption. It's also fascinating how many low-price providers are in the top ten, companies like Costco, JCPenney, Target, and BJ's. In a recession, providing low prices and an experience that's better than people expect is a prescription for success.

USAA is a case unto itself. Serving military families and staffed with many ex-military staff itself, the company has a dedication to great experience that stands out. USAA is rapidly embracing social and mobile technologies because much of customer experience has shifted to those channels.

What do these results mean for you?

As Andy Sernovitz says, "Advertising is the cost of being boring." On the other hand, advertising is a lot cheaper a and easier than changing a company's culture to focus on customer experience. If you're an advertiser, sure, you can keep hammering the message of how great you are, even if your customers think differently. If you're an agency, companies like this will support you for years to come. But in the end, people will find out the truth -- and with social technology, that happens more easily every day.

Or, you could put your money and effort into improving the experience. That's an effort that will take a couple of years, but with buyers coming back and seeking value as the recession lifts, you'll attract the leaders. They'll talk. You could end up like Zappos, where the customer word of mouth is most of the marketing. Or, you could just develop a customer experience that resonates with consumers, which is a whole lot easier to advertise.

Customer Experience Index survey

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Comments

Shalin Shah

Increasing revenue and decreasing costs are imperative economic goals.
Maintaining customer loyalty, reducing customer churn, efficiently providing
services, and accurately billing for services are just some of the ways you can
achieve these goals. Operational Intelligence provides the foundation for
delivering a timely, accurate operating picture, to enable you to focus on key events
and reliably monitor responses. The result is customer service excellence.

James

Look at tobacco companies. Even though there are protests, commercials, doctor warnings and more that go against their product people are still smoking. People don't always make the right choices even if they know the company is bad. So I would say put your money into advertising because no matter how good your services are, if no one has heard of you then you won't make any money.

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