C/DXE as Competitive Imperative
Author: Dr. Katharina Gawrisch
Customer experience is a complex, multidimensional construct comprising “[...] customer’s cognitive, emotional, behavioral, sensorial, and social responses to a firm’s offerings during the customer’s entire purchase journey” (Lemon and Verhoef 2016, p. 71). Thereby, customer experience management (CEM) can be defined as “[...] the process of strategically managing a customer’s entire experience with a product or a company… It is a process-oriented satisfaction idea (not an outcome-oriented one)” (Schmitt 2003, p. 17–18).
In other words, customer experience excellence is a truly customer-centric management concept, which is nicely reflected in the quote by Jeff Bezos, the CEO of Amazon: “We see our customers as invited guests to a party, and we are the hosts. It is our job every day to make every important aspect of the customer experience a little bit better.” Importantly, the company seems to take this statement very seriously: In April 2019, Amazon’s CFO, Brian Olsavsky, announced that the firm would spend $800 million to transition to one-day shipping for Prime in order to improve the customer experience and make Amazon’s signature Prime membership even more irresistible to consumers.[1] Apparently, such relentlessly customer-oriented actions do indeed pay off, as will be discussed below.
Customer/Digital Experience Excellence as a New Competitive Imperative for Firms
Consumers now interact with companies through numerous touch points in multiple channels and media, which results in highly complex customer journeys. Moreover, customer-to-customer interactions through social media create significant challenges for firms such as decreased control of the customer journey and experience. What we must understand in this regard is that products and services are simply a means to an end with no value in and of themselves and that consumers buy them to have experiences. Consequently, to survive and thrive in today’s turbulent, highly competitive business environment characterized by accelerating media and channel fragmentation, offering high-quality products and services alone is not sufficient. Instead companies are forced to compete on the basis of offering excellent (digital) customer experiences along all stages of the buying process.
According to a recent survey (Q4/2018) conducted by the Kellogg School of Management at the Northwestern University (Chicago) more than 80% of customers now consider the experience to be at least as important as the product, making it an integral part of the product. Moreover, 73% of customers expect companies to better understand their needs and expectations, with 54% of customers believing that most firms do not use customer data in a way that would benefit them.[2] What’s more, 77% of digital natives expect personalized digital experiences.[3] Accordingly, customers’ actions are more and more experience-driven, and managers seem to recognize this trend: A study conducted by Accenture in 2015 in cooperation with Forrester revealed that improving the customer experience is a top priority of executives.[4]
In this regard, another trend, which is currently on everyone’s lips, is the so-called Flywheel model. The term flywheel comes from the field of mechanics and stands for a construct that is used in a machine to increase momentum and provide stability to the machine. The flywheel is difficult to push from a standstill, but once it starts running it gradually builds momentum and eventually enables the wheel to turn by itself and create even more of its own momentum through a self-reinforcing loop.[5] The fact that the flywheel is now an established symbol of business and marketing processes is due to the work of two people: Jim Collins (Stanford professor and management expert) and Jeff Bezos. In 2001, Amazon had a tough time, and this was when Bezos contacted Collins asking for support. At a company meeting, Collins showed Amazon’s management the "Flywheel" concept he had developed, and Bezos adapted it to Amazon’s needs.
The wheel that Amazon intended to put in motion was growth. In order to achieve this, i.e. to grow the company, Amazon must first offer a fantastic customer experience. Then the number of visitors (i.e., traffic) will increase, which in turn makes Amazon more appealing to external sellers. If they sell more via Amazon, the product range will grow (selection), which in turn improves the customer experience. This development triggers a further cycle: Through the growth generated in this way, Amazon should be able to reduce its own costs and, as a result, the price for customers, which in turn pays off in the customer experience[6].
From the above, it is clear that practitioners begun appraising customer experience as one of the most promising management approaches to address current and future business challenges. Especially the massive growth of digital customer data is radically transforming the way businesses provide experiences. The accumulation of big data is both a curse and a blessing: On the one hand, it unleashes numerous opportunities for excellent customer experience and consequently competitive advantage, but on the other hand, extracting useful, customer-centric knowledge from data still represents a major challenge to most organizations.
References & Literature
[1] https://qz.com/1675621/amazon-profit-falls-on-investment-in-one-day-prime-delivery/
[2] https://www.salesforce.com/company/news-press/stories/2019/06/061219-g/
[3] https://venturebeat.com/2015/07/22/80-of-consumers-have-updated-their-privacy-settings-and-other-barriers-to-personalization/
[4] https://newsroom.accenture.com/news/improving-customer-experience-is-top-business-priority-for-companies-pursuing-digital-transformation-according-to-accenture-study.htm
[5] https://feedvisor.com/resources/amazon-trends/amazon-flywheel-explained/
[6] https://feedvisor.com/resources/amazon-trends/amazon-flywheel-explained/
[6] https://omr.com/de/flywheel/
Lemon, K. N., & Verhoef, P. C. (2016), “Understanding customer experience throughout the customer journey,” Journal of Marketing, 80, 69-96.
Schmitt, B. H. (2003). Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers. New York: The Free Press.
