2012 Customer Experience Predictions: Positives and Pitfalls

Colin Shaw

A new calendar year gives us a new threshold to cross, providing an opportunity to look back at what we’ve learned, and to look forward, leaving often bleak times in the past. As I look forward to 2012, I see a global business landscape filled with hope. But I won’t run carefree into the New Year, and neither should you.

Building on the experience I’ve acquired, the news reports I’ve followed and my understanding of the global economy through the client work Beyond Philosophy has done, 2012 also will be pockmarked with pitfalls that can devastate business plans and damage entire industries. What are the highlights? The dangers?

Beyond Philosophy is approaching 2012 with the following predictions in mind:

  1. Business leaders will finally accept that the world financial crisis is here to stay – at least for the next few years
    No matter where you are in the world, you have seen bleak news reports outlining the financial malaise we’re suffering through. It’s not going to get better anytime soon. The “good old days” are behind us; the next few years will be rocky and it’s our job to adapt and get through it as smoothly as possible.
  2. Innovation is in the air
    Around the world, governments and corporations alike have caught the “austerity bug,” meaning leaders have a strong reluctance to invest in capital-intensive projects while simultaneously cutting costs. The austerity bug, for some businesses, has meant resignation, complacency and defeat – but I choose to look at management’s increased drive for cost-savings as a positive. Austerity, as it turns out, is a friend of innovation.More than ever before, when it comes to spending management has to take a hard look at resource allocation. Businesses are caught between the mass commoditization of their products and services and the need for austerity. Commoditization created a need for increased competition, resulting in the development and growth of the customer experience management industry.In a period of economic recession, it might seem to make sense for companies to cut back until the economy recovers, but this prolonged recession is anything but ordinary. A client recently explained to me, “we’ve been cutting back, but it gets to a point where the competition is so fierce that we have to invest in improving our customer experience so we don’t lose all our customers.” Consequently, being stuck “between a rock and a hard place” increased competition and austerity has turned leaders toward the customer experience as a cost-effective way to drive business value, retain existing customers, acquire new customers and improve the organization’s competitive edge.

    In Beyond Philosophy’s 2011 Global Customer Experience Management Survey we found that in spite of the recession, CE growth is increasing in high-maturity markets in the wake of commoditization. CE growth in high-maturity markets (especially in certain niche sectors like manufacturing), combined with the drive for CE as a competitive response in mid-mature markets, provides a compelling case for optimism.

  3. Organizations will loosen the purse strings and start spending cash reserves Once the Eurozone crisis settles down – probably in the second half of the year – the time will be ripe to invest cash reserves organizations have built out of economic concern into customer experience initiatives. Given what we know through our research and through client interactions across the globe, CE is poised for growth.Analyst Thomas Hirst, writing for FundWeb, critically observes that “while holding cash during uncertain times might appear a prudent policy… [it] acts as a drag on equity returns.” Companies like Apple, Inc., that are sitting on billions of dollars of cash, are only contributing to the economic malaise. We will see more forward-thinking organizations invest some of their cash into CE initiatives. By deploying cash to capture customer experience as a new avenue for growth, these companies will reap significant long-term benefits.
  4. Investment in emerging markets will increase substantially
    I’ve been taken aback by the truly global scope of the customer experience. The world, it seems, has caught on to the power and results a great customer can deliver. In fact, in 2011 Beyond Philosophy engaged with clients and responded to requests from such far-flung regions as South Africa, Uganda, Nigeria, Dubai, Kuwait and Egypt. In mid-mature countries, there is a strong push within retail to for the emotionally driven “luxury” experience of Western brands among the burgeoning upper-middle classes. The BRICK countries (Brazil, Russia, India, China and South Korea) are also top players in this scene. On the bright side, these regions have not been as badly affected by the global economic crisis as regions in the west.
  5. Understanding and acceptance of customer experience as a business strategy will improve
    Growing numbers of leaders are beginning to understand the opportunities they’re losing by just focusing on the rational experience. They are validating the emotional aspects of CE as a vital component of their organizations’ identities. Embracing the cultural change required to deliver a world-class customer experience means converting the customers and employees into emotional stakeholders in your organization.Commoditization in saturated markets has been responsible for the increasing demand for irreplaceable, one-of-a-kind interactions between producers and consumers. We try to ferret out the best examples, including Volkswagen’s Transparent Factory, Tesco South Korea’s QR code-enabled subway station grocery store and Spain’s perfume-selling restaurant, Cellar de Can Roca, in our blog.But the news isn’t all good. As we also identified in our recent study, there are threats to the customer experience industry that must be addressed.
  6. The definition of customer experience will continue to be misunderstoodThere is a profound lack of conceptual clarity among organizational leaders regarding what does and does not comprise customer experience management. For organizations that are taking the lead by investing their reserves on customer experience initiatives, misunderstanding of the term represents a grave threat to both the success and the future prospects for the practice.Customer experience initiatives are not instant fixes, but they can provide significant, long-lasting results when executed properly. Through customer experience management, one of our clients improved its Net Promoter Score by 25 points in 18 months. The danger is when organizations think they are focusing on improving their customer experience when all they’re really doing is “putting lipstick on a pig.” In other words, they’re continuing to do the same things, rebranding those activities as customer experience, and blaming the concept of customer experience when things don’t work.

    The consequence is that a poorly designed CE program will destroy any future value for a promising and properly-implemented initiative. Compounding the issue is a loss of staff confidence in the effectiveness of CE as a value-driver, building resistance to any future CE program.

    I recently wrote an article entitled “Rebranding CRM as customer experience management: The road to ruin?” which offers an overview of how misappropriation of CRM as CEM by software vendors contributes to this misguided practice.

  7. Net Promoters Scores will continue to be the primary judge of customer experience initiative effectivenessLet me first say that I like Net Promoter Scores (NPS). I think they provide good feedback that organizations can use to understand their current positions and determine where they can improve. But relying solely on NPS to judge the effectiveness of a customer experience initiative is a danger to which too many organizations succumb. NPS is a good foundation, but organizations must overlay other measurements in order to build a complete CE picture. While it’s been a challenge in the past, more organizations will begin to appreciate this fact.
  8. Opportunities for growth will exist in 2012Regardless of your outlook, be it optimistic or pessimistic, opportunities for business expansion through CE as an avenue for growth will exist in 2012. One implication of the financial crisis is the importance of customer retention versus customer acquisition. In an a spending environment marked by low interest rates and high inflation, a focus on building great customer experiences with your existing client base is a smart move, particularly since the cost of retaining customers is far less than the cost of acquiring new ones. In a spend-thrift driven recession, retention is an ideal strategy. In general, 80% of your profits come from 20% of your existing customers.
  9. Mobile devices will grow in market share and CE importanceIn addition to prioritizing customer retention, the digital world is the next frontier for CE in 2012. Mobile devices and tablets drive one third of our web traffic. In 2010, consumers spent more than one billion dollars ($1028 million USD) on Cyber Monday. What’s even more shocking? In 2011, consumers spent 22% more, or approximately $1.251 billion online.
  10. Social media will continue to drive online CESocial media bolsters the digital customer experience as companies receive direct feedback from customers in real time. The prevalence of mobile and tablet devices, online shopping and social media sow the seeds in a fertile ground for CE growth in mobile technology in 2012.

In economic times like these, I’m reminded of a scene from an old black-and-white movie I saw many years ago that illustrates the reason we need to stay committed to CE, even in the post-recession world. In a high-speed car race, the lead driver had a major collision. When they interviewed the winner at the end of the race, he was asked about whether slowed down in the wake of the accident. He responded, “No, I actually increased my speed because I knew all the other drivers would slow down and this was my opportunity to win.”

The financial crisis is our race. The key question is, “which you will drive?” Will you slow down or speed up? Necessity is the mother of invention, and 2012 will be the year in which the customer experience will continue to grow in importance around the globe, despite the problems the world faces.

Republished with permission from CustomerThink.com
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