Customer Experience is the Product

Recently, I received an update on a company I know well; it's at risk of a death spiral:

A pandemic => change in customer behaviors => loss of market share to competitors.

Another story unfolding in the public domain is of Chegg:

Launch of chatgpt => change in customer preferences => drop in value by 50%

The common theme in both cases is an "outdated" customer experience (CX). 

In today's world, simply selling a product or service is not enough. CX is all customer touchpoints and interactions combined with your company, brand, or products throughout the entire customer lifecycle. CX is the way to deliver the full value of your product or service. 

While it is common knowledge, this topic requires a closer look. Our research indicates CX has undergone a transformational change around every 7-8 years: 

• In the early 2000s, customers became co-creators of the value with brands with their ability to publicly post product reviews and share recommendations on the Internet.

• In the late 2000s, CEM (CX management) was a leading performance indicator compared to CRM after enterprises invested significantly in the latter.

• During 2017-18, AI-based customer journey personalization tech reached the scale to enable data-driven CX management. I was leading one of the top personalization platforms at this time as industries witnessed new winners and losers (especially the failed retail companies).

Today, we are in the middle of another CX transformation with the general availability of generative tech or generative-ai like chatgpt, Bing chat, and Google Bard.

CX goes beyond just providing a high-quality product or service and is about delivering a memorable experience. 

We experience some great CX stories from everyday life. Recently, I decided to use an express bus from downtown to the airport in Montreal, Canada. The bus arrived on time. I flashed my transit card and realized I needed to add more credits. Instead of leaving me, the bus operator patiently waited for me. He got off the bus and even tried to help because the kiosk outside failed to add credits to my transit card. He finally let me and another passenger take the ride at a lesser fare.

While the airport route was the service, the bus driver understood that the real value was providing airport transport to paying travelers.

Similarly, before the pandemic, we remember the experience of a routine visit to a doctor's office – a call (or more) to book an appointment, arriving and waiting at the clinic, support staff's demeanor, etc. Over the last three years, this CX transformed entirely – online booking portals with automatic calendar entries, video calls with the doctor in the comfort of your home, the ability to get a coffee the way you like if left waiting, online payments, and access to bills.

CX makes a human bond with your product or service. It doesn't matter what product you offer: legal services, patient care, or selling clothes online. With an even faster evolution of tech and AI, CX is the product because this is how you deliver value to your customers. 

In today's rapidly changing business environment, companies can no longer solely rely on product differentiators as a competitive advantage. Customers have several options making it increasingly difficult to differentiate based on product or service alone. 

In addition to commoditization, customer preferences have been changing rapidly too. 

Technologies like Chatgpt have provided a new set of capabilities to the masses. Consider Chegg's example. Customers do not see a need for homework services as they did in 2022. They get a highly personalized experience and fast responses from chatgpt, which leads to changing customer preferences and expectations. Companies that cannot keep up with these changes risk losing their customers to alternatives and more agile and customer-focused competitors. As a result, new winners and losers emerge. 

Winners will continue to create a loyal customer base and stand out from their competitors by delivering "updated personalized, seamless, and memorable experiences" at critical moments of the customer lifecycle. CX is a core differentiator in the marketplace.

CX is unique to every company, and there's no one-size-fits-all approach. The entire scope of customer experience is comprehensive and complex. A company's industry, target customers, business model, sales and marketing channels, distribution or delivery channels, and post-purchase support all shape CX for its customers. Identifying the critical moments in the customer journey to influence is vital. A company needs to decide which areas of the customer journey will impact its CX most.

A B2B professional services company we work with sells audit services to other businesses. They need a different CX approach than our other customer, a B2C fintech company that sells tax & finance subscriptions to individual consumers. The B2B company must focus on creating a more personalized and consultative experience that addresses its customers' specific needs and pain points. In contrast, the B2C company may focus more on creating a fun and engaging user experience on a dry and anxiety-inducing topic of personal finance and taxes.

Similarly, I recently discussed with the CMO of a company that sells landscaping services through their app. They offer a different CX than other landscaping companies selling through physical stores like Home Depot. The app-focused company must provide a seamless and intuitive online experience by addressing customer needs and expectations through the app. In contrast, the physical stores-based company must focus more on creating an inviting and memorable in-store experience through its store associates.

In short, companies need to tailor their approach to their unique circumstances to offer the most relevant, differentiated, and memorable customer experiences. 

This article offers a detailed framework for business leaders and teams to strategize, collaborate, and win. We are sharing a high-level CX worksheet with 17 stages in the customer lifecycle for B2B and B2C companies. 

Step 1. Leverage a top-down framework to build a CX strategy. Start with the CX strategy tab.

1. Define objectives or business goals—for example, double customer retention revenue over the next 12 months. 

• Highlight the stages in the customer lifecycle that could be most relevant.

2. Develop hypotheses, list assumptions, and prioritize. For example, 

1. Hypotheses include specific customer segments, stages of customer lifecycles, etc.

1. Hypothesis: Improving response times for customer support inquiries will lead to higher customer retention revenue on the east coast. 

2. Assumptions: Some customers place subsequent orders at the last minute and require quicker response times.

2. Prioritize a hypothesis and verify underlying assumptions. For example, textual analysis of the incoming customer calls indicates intent to place orders.

1. If the hypothesis is unproven, move on to the next one.

3. If the hypothesis is true, plan to build capabilities, teams, and systems to update CX. For example,

1. Product: Offer a "last-min" product/service at a higher price that can be delivered quickly.

1. Capability 1. Design-based thinking on the new product

2. Capability 2. Separate digital stack for marketing, sales, and post-sales data aggregation and analysis

2. Teams: Product strategy, Design, Marketing, Sales, and Support. Define who will do what. Define objectives at the individual, and the team level

1. For example, the last-min-product volume might increase retention revenue by up to 80%, although at a much higher cost. 

2. Update the strategy on increasing the gross margin or profitability of the product (if that's the next business objective).

Step 2. Plan to build specific capabilities, including new tech and tools and data management/engineering, analytics, or AI.

Technology transformations significantly impact CX strategy in the modern business environment. Customers can access newer and different apps or tools to learn, discuss and make choices. As such, their needs, preferences, and expectations change rapidly. These changes are, at times, powerful enough to even change the business model of your product or service. 

To manage these changes, companies need to be agile in building and updating customer experience capabilities. The team must be able to dive deep but keep sight of the horizon.

From CX strategy to capability planning, a business leader must prioritize the building blocks first and add more capabilities. Some of the most common ones are:

• Aggregation and analysis of data from multiple sources to enable data-driven decision making

• Agile and collaborative processes to refine and optimize customer pathways in the journey; leveraging design-based approach to understand customer behaviors

• Leveraging data for personalization of the most impactful lifecycle stages

• Self-service capabilities and automation of specific customer interactions through AI chatbots, if relevant

• Predictive analytics and forecasting, ideally on customer actions and behaviors (in B2B, this leads to capabilities like lead scoring to prioritize sales efforts).

• Leverage generative tech to automate routine tasks and free up time for more complex, open-ended challenges.

• Generate real-time insights into customer engagement and satisfaction.

Tech-savvy and innovative companies will be able to differentiate themselves from their competitors and drive long-term customer loyalty and growth. Although, delivering exceptional customer experience is about more than just implementing the latest tools and tech. 

Step 3. Hire the right people and skills to lead the CX initiative.

CX initiatives are complex and multidisciplinary, requiring collaboration from various stakeholders. For instance, a legal services company's CX strategy might involve collaboration between the marketing, product development, and customer service teams. The marketing team may be responsible for improving customer insights (needs and preferences), while the product development team might focus on new intuitive product-user experiences. Meanwhile, the customer service team could provide feedback on FAQs, common pain points, and ways to improve specific areas of the product. Similarly, a healthcare organization's CX strategy may involve doctors, nurses, administrators, and patients' input. 

Large-cap tech companies like Amazon and Google are known for their customer-centric designs, product management practices, and CX innovation. They leverage user feedback and data to improve their products and services continuously. 

Product management is a discipline that focuses on developing and delivering products that meet customer needs and drive business growth. Product management is responsible for managing cross-functional teams in developing and providing such solutions. Business leaders need to source product management skills either internally or externally. Applying product management practices to CX means taking a customer-centric and data-driven approach to CX strategy, identifying and prioritizing CX initiatives based on customer preferences, and leading cross-functional teams to build and deliver CX solutions.

By adopting a product mindset, companies can create a data-driven and customer-focused culture with a methodology of continuous improvements in their CX strategy.

A high-quality product manager is also comfortable applying a top-down strategic approach (as shared above) and a bottom-up innovation as needed. Working with dozens of our customers, we noticed that as companies build these capabilities and encourage innovation, a product manager or an engineer can find innovative ways to solve some challenges by harnessing the nature of your data and processes. 

Step 4. Define team and individual KPIs, execute, measure, and iterate.

Finally, defining key performance indicators (KPIs) at the team and the individual level is critical. These KPIs must be quantifiable and specific and add to the overall objectives you started with in Step #1 (your CX strategy and business objectives). 

Building on the example highlighted in Step #1, let's assume the strategy is to send a follow-up text with a self-serve landing page for every customer who seems to be interested in the "last-min" product. The customers can easily place another order and pay in less than three clicks.

In this example, the team must update the hypothetical customer experience of this process. Then define the potential KPIs; a sample list is:

1. # of calls with an intent to inquire about a subsequent purchase (start of the new CX)

2. # of texts sent to phones

3. Click thru rate of the URL in the texts

4. Dwell times and heatmaps on the landing page to optimize the design

5. Checkout rate on the landing page

6. Total revenue booked

Once KPIs are defined, the team must create a process to collect relevant data and analyze and monitor progress. Data collection should be consistent and timely and involve quantitative and qualitative metrics to understand the customer experience comprehensively.

The ongoing analysis will provide insights into the effectiveness of the CX strategy. These data and insights are critical to managing cross-functional teams, facilitating collaborative discussions, and identifying actionable insights to drive iterative improvements.

Iterative improvements include refining specific touchpoints, optimizing processes, enhancing communication channels, or adjusting customer service protocols. It's essential to prioritize changes based on their potential impact and feasibility while considering customer feedback and industry best practices.

Conclusion: Product/service offered + right customer experiences created = Your Product

References:

https://hbr.org/2000/01/co-opting-customer-competence (2001)

https://hbr.org/2007/02/understanding-customer-experience (2007)

The CEO guide to customer experience | McKinsey (2016)