The State of Customer Experience Today: Spending More Doesn't Drive Success

For about a decade, my Beyond Philosophy colleagues and I have been fortunate to help some of the world's most recognizable brands improve their customer experiences. Through that work, I've recognized the value of an international perspective on customer experience management (CEM). To this end, we recently conducted a survey to gauge the state of CEM around the world. The 2011 Beyond Philosophy Global Customer Experience Management Survey had intriguing findings, and we believe they have significant implications for the CEM industry.

The research was conducted in two ways:

• We analyzed data from a pool of more than 8,000 customer experience executives across 2,106 companies covering a total of 239 countries and regions. We selected the 8,000 from "CE-active companies."
• We conducted in-depth interviews with 53 industry executives and experts whose official titles included the phrase "customer experience." Our sample size represents a balanced cross-section of experts, industries and regions.

Global Evolution of Customer Experience Maturity

Since the goal of our inquiry was to model the state of the world for customer experience, we also developed a CE Maturity Index. Using the CE Maturity Index we quantitatively examined the concentration of CE-active companies, existence of key CE players, market share, country Google presence, business size, aggregate market conditions and overall competitiveness within a given industry.

On the qualitative side, we looked at awareness of CE as a formal term, the accuracy of understanding, the degree to which CE is incorporated into overall business strategy and whether CE drives value (in terms of customer satisfaction or loyalty). From our CE Maturity Index, we created a Seven-Stage Maturity Model to discuss our findings and effectively point out key insights. The Seven-Stage Maturity Model consists of high, high-mid, mid, mid-low, low, low-very low and no CE presence at all.

In looking at the regions where CE has the highest growth potential, the first key finding is that countries with mid-low CE maturity are the key to growth. Examples of countries in this phase of maturity are Nigeria, China, India and Brazil. For companies in these markets, while customer acquisition and short-term sales remain a key focus, CE is becoming the key element to effective market differentiation; although, internally, most companies operating in these regions still have a limited knowledge of CE.

Interestingly we also found that in many of these markets, social media is being used to 'leapfrog a technology.'

A related insight is that companies in the mid-high maturity stage also represent prime areas for CE growth. In retail, there is a strong push to "experience" western brands. The burgeoning upper-middle class in the United Arab Emirates, India and China craves luxury retail items and the experience that accompanies them.

Resource Allocation Doesn't Drive Customer Experience Success

Shifting away from a focus on potential CE development, we turned to an examination of CE resource allocation. We found that resource allocation does not equal successful CE. CE expenditure often takes the form of CRM software sales; a complete misunderstanding of what CE actually means. Too often firms are guilty of putting 'lipstick on a pig' just renaming marketing as customer experience, or as an excuse for more measurements and no action.

By industry, 63 percent of resource allocation can be accounted for within four verticals: telecoms, banking, retail and IT/services. To put this finding into context, of the 2,106 companies we analyzed, telecoms were the most CE-active companies (441), where logistics represented the least (51).

When we looked closer at the concentration of CE resource allocation, we found that regardless of region, the "Big Four" industries drive overall resource allocation. In Brazil, India and Singapore, the Big Four drive 78 percent, 71 percent and 70 percent of all CE resource allocation, respectively. In short, the Big Four are often responsible for overall CE development in a particular region.

In high-mature markets (e.g. USA and UK), there is greater diversity by industry. Specifically the insurance, software, utilities and motor industries are looking to CE more than ever to gain a competitive advantage in response to commoditization of their products.

Taking an even deeper look at resource allocation by industry, we looked at specific companies. The top five companies in terms of resource allocation to CE are Hewlett-Packard, HSBC, Vodafone, Gap and American Express. Our metric consists of company location, spread, international presence and number of CE executives.

At the same time, the companies most admired by CE professionals for the customer experience they provide include Apple, Amazon, Zappos, Starbucks and Disney. In other words, high expenditure on CE does not guarantee "successful" or "admired" CE among experts. What does lead to success is the right allocation of resource based on the correct understanding of what customer experience means.

Risks and Opportunities

Our findings are exciting because they help us—and you—look at some of the major threats and opportunities for the next wave of CE. Some of these risks include limited adoption of CE initiatives, relabeling of CRM as CEM, misappropriation of the term CEM by software vendors (especially in low-maturity regions), failure to consider customer emotions as a part of overall return on short-term and long-term investment, and the length of time it takes to execute CE initiatives.

Our top three suggestions to face the real risks are the following:

1. Understand CE and its relationship to emotional engagement.
2. Engage your organization and embed a CE-focused culture.
3. Monitor and review changes; demonstrate the effects of CE on ROI.

With this organizational roadmap, CEM is transformative, meaning it becomes an organizing principle that maintains CE over the long run.

We produced three different white papers outlining the results of the 2011 Beyond Philosophy Global Customer Experience Survey, and I'd like to invite you to download them free on Beyond Philosophy's website.

• 2011 Beyond Philosophy Global CEM Survey: Executive Summary
• 2011 Beyond Philosophy Global CEM Survey: Insights
• 2011 Beyond Philosophy Global CEM Survey: Implications