experience matters

I just finished reading the results of this year’s Customer Experience Index (log in required for full access) published by Forrester Research. Each year, Forrester asks a few thousand U.S. consumers to rate the experiences they have with companies when buying everyday things like clothing, cars, cell phone service and health insurance. Forrester tallies the scores, ranking 154 brands and 13 industries on a scale from “excellent” to “very poor” based on the customer experiences they deliver. The results are eye opening. Just one-third of companies scored high enough to be considered “good” or better. The rest earned scores of “okay,” “poor,” and “very poor.” According to the report, consumers are generally not satisfied with the experiences they have with companies they patronize.

Looking over the list, the question “why” kept coming to mind. Why, with all the focus on the value of customer experience, with all the attention the business press heaps on this experience-based economy, do two-thirds of companies persist in turning in such poor performances? Forrester’s own research “shows that improving customer experience can have an enormous positive impact on a firm’s bottom line.” Didn’t these folks get the memo?

I also noticed some clear patterns among Forrester’s also-rans. A few industries harbor more than their fair share of customer experience laggards. The three lowest scoring are: PC manufacturers, Internet and TV service providers and – at the very bottom – health insurance plans. What is it about these sectors that holds them back relative to the others? Perhaps there are factors inherent in their business models, controllable or not, that contribute to an industry’s tendency to appear at a certain point in the rankings. I offer my thoughts on three conditions that may contribute to their situations, not to excuse bad performance, but to explore additional issues at play in determining customer experience. It’s issues like these that must be overcome if customers are to feel fully served and satisfied.

1. High switching costs
Like a nation in the grip of a greedy despot, companies that lock in customers with long service contracts or make them endure complex purchase processes have less incentive to listen to unhappy constituents. Once a customer has been acquired, firms with high switching costs reap the benefit of a steady income stream, even when customers are not pleased. In some situations customers may face a Hobson’s choice: put up with the poor service or endure the pain of changing providers. This artificial loyalty prevents customers from acting. They may pay their bills every month but they aren’t happy about it. However, in a world of empowered customers, word will get out. Eventually. Firms that rely on high switching costs must hope that their marketing efforts can outshout and outlast a vocal crowd equipped with social media, and perhaps, pitchforks.

2. Little direct contact with end-users
Winners in Forrester’s report include classic high-touch industries like retailers and hotels. These businesses survive on the countless person-to-person interactions delivered everyday by service employees. Contact with customers is direct and frequent with plenty of feedback loops enabling course correction when needed. In contrast, health insurance plans, TV service providers and ISPs rarely see their customers face-to-face (cable guy notwithstanding). Perhaps these laggards would be served by rethinking how they make contact with customers. Forrester advises the list’s cellar dwellers to focus on building a customer-centric culture led by progressive strategies for hiring, socialization of values and rewards for employees. Good advice. These firms should also consider new video and touch technologies that have the potential to bridge the distance between customer service reps and customer and strive to make those interactions more like what you experience when you visit your favorite shop.

3. Minimal consumer stake in the selection process
Related to having little direct end-user contact is the situation in which customers are not really customers. I happen to think my health care plan is very good, with excellent service. This opinion apparently puts me in the minority but nevertheless, what I think doesn’t matter very much. I’m actually not my health care plan’s customer. My employer is. Critical Mass chose the plan and I signed up for it. The only way I can experience a different plan is by opting out and buying insurance on my own. Same for my cable service. My condo association signed up with a provider years ago without input from me. I suppose Forrester could have polled digital agencies and condo homeowner associations to elicit their opinions on what makes a great customer experience. However, the forces of change are upon these industries. As health care becomes more democratized and TV content shifts to the Internet, empowered customers will have even more impact on provider choice. And if I were one of those laggards, I wouldn’t bet too heavily on satisfying only the folks who pay the bills.

David is an Insight & Planning Director in the Chicago office.