Turning customer experience into a source of delight for customers can lead to new and sustainable differentiation for your company.
Technology is changing consumer dynamics, with digital tools restructuring the customer experience in many industries. However, the journey to customer-centricity will not be an easy one.
In building a strong foundation for the future, companies will need to focus on a new set of core principles to redefine relationships. There will be many challenges in developing the critical new capabilities that align objectives, targets, rewards and recognition with customer needs. Companies will have to set the bar high when it comes to simplicity, personalisation, and interactivity.
To truly reinvent the customer experience, they will have to turn to data and analytics-based insights about what really matters to customers and how best to deliver it to them.
“Some companies fail to capture the full benefits of their improvement efforts because they concentrate on optimising individual touchpoints rather than tackling the customer experience as customers actually experience it—a complete journey that cuts across multiple functions and channels. The other imperative for companies is to explicitly tie the reinvented customer experience to their operations. If they focus only on the front-end experience and don’t change the back-end operations that support it, the new experience is unlikely to be sustainable. Changes will be needed in both underlying processes and the way employees work.” – McKinsey & Company
According to McKinsey, enhancing the customer experience can bring rich rewards. ‘Across industries, satisfied customers spend more and stay more loyal over time. In banking, customers are seven times more likely to increase their deposits and twice as likely to open an additional account if they rate a bank as excellent (with a customer-satisfaction score of nine or ten out of ten) rather than average (six to eight out of ten). Similarly, pay-TV customers who rate their provider as excellent tend to stay with it for up to twice as long as they would a provider they rate as average or below.’
Capturing value from customer experience improvement
McKinsey points out that there are two key questions companies must ask to help them capture the greatest value from improving their customer experience:
1.How do you find out what really matters to customers?
‘Companies that excel at this do two things: They streamline their operations and take out cost, and they create new experiences and tap new sources of value. Many organisations simply take a “problem view”— treating internal processes as a cost that needs to be reduced, and looking for customer pain points that need to be eliminated. That’s a good place to start, but if it’s the only view, it misses out on the idea of creating additional customer value.’
Companies that can demonstrate understanding for customers’ needs and situations, and address their problems quickly and easily stand to create massive value, find new business opportunities, and shift their operating model over time, according to McKinsey.
DID YOU KNOW?
New York start-up Lemonade is shaking up the insurance business by tackling inefficiencies. Behind the scenes, instead of underwriters Lemonade uses algorithms; and instead of expensive brokers and salespeople it uses chatbots. It even uses AI and machine-learning to handle claims, a job typically seen as needing a human touch. Late last year, a customer named Brandon claimed for a stolen coat. He answered a few questions on the Lemonade app and recorded a report on his iPhone. Three seconds later his claim was paid—a world record, says Lemonade. In those three seconds “A.I. Jim”, the firm’s claims bot, reviewed the claim, cross-checked it with the policy, ran 18 anti-fraud algorithms, approved it, sent payment instructions to the bank and informed Brandon.
2.How do you link customer experience to operational improvements?
Companies need to embed customer journeys into their operations models. ‘Most organisations manage operations, track performance, and measure customer satisfaction along functional lines,’ says McKinsey. ‘Yet the best way to tackle customer experience is to follow it from the customer’s point of view, along a journey that cuts across functions and channels. That’s because customers frequently use multiple channels to interact with their service provider, and need multiple interactions to complete a transaction.’
Designing a customer-centric operation model
A customer trying to resolve an issue, for example, may have to report it via an app, send an email, contact the call centre, pop into a retail outlet and more. Even if every one of these touchpoints provides an excellent customer experience, the overall journey and effort required is unlikely impress when it comes to customer delight.
Digitisation allows companies to work backward from what customers would like to see instead of getting bogged down in incremental improvements. According to EY, a customer-centric organisation builds an operating model around a deep understanding of its customers, what they value and the contribution each makes to the profitability of the company.
- Designing business processes that recognise different customer segment needs.
- Delivering a positive and seamless customer experience at every touchpoint across the customer lifecycle.
- Maintaining an active dialogue with customers (and acting on feedback).
- Fostering a culture that places the customer at the heart of the decision-making process.
The result is a completely reimagined customer experience. But to achieve maximum economic value, the new experience must be linked to underlying operational processes.
To get that right, McKinsey adds, requires an understanding of two things: What creates value across a given journey from the customer’s point of view (faster cycle time, personalisation, cross-channel functionality, and so on) and what drives business costs and revenues (number of manual touches, extent of customer fallout, additional product sales, etc.).
Because it can be difficult for a business built on processes and structures to rethink internal workings from the customer’s point of view, it can be helpful to start with small changes.
‘Describing journeys from the customer’s perspective – “I wait in line” or “I receive a bill” – is also helpful in exploring what can go wrong and how to put it right,’ says McKinsey.
An example from the banking industry
In its survey of US customers, McKinsey investigated the parts of banking journeys that had the biggest impact on satisfaction, and how well banks performed in them.
The researchers found that in the sign-up process, what mattered most to customers was the smooth completion of the application, followed by the availability of information to help them compare and choose products and services; the choice of products and services; the ease of understanding interest rates, account fees, and other features; the simplicity of signing up online; and finally knowing the customer representative and the quality of his or her service.
Leading banks enabled customers to open an account in under ten minutes.
McKinsey concludes that much of the value of digitisation comes from the way it helps organisations address multiple elements that work together to create a customer journey—not just the customer experience itself, but all the operational processes that underpin it. It advises companies as follows:
- Start with a clear understanding of what customers value and use it to decide where to focus (and what to de-emphasise).
- Guided by these priorities, simplify and streamline your underlying product and services; if you don’t, you’re likely to digitise existing complexity.
- Link customer value to the operational drivers that underpin it, then design a new operating model based on these linkages, working back from the customer and using digital tools to streamline or automate your processes in line with what customers care about.
- Tackle the most important customer journeys one by one and support the effort with operational changes to improve efficiency and speed.
- Embed agile, cross-functional ways of working and re-engineer your management system to support continuous improvement.
At the core of the issue, financial institutions need to clarify how segments, products and channels interact to deliver the experience. The result will be a much more flexible operating model that delivers a consultative client experience.
1. Take a realistic look at your propositions (solutions, not products) — what will it take to deliver what customers want at a price they want to pay and still make money?
2. Start to build a culture that puts the customer at the centre and aligns objectives, targets, rewards and recognition with customer needs.
3. Learn to be adaptive — use detailed customer insight to test, learn and act quickly; accelerating processes with prototype initiatives.