This is the first of three articles exploring the concept of customer experience; while subsequent articles will focus on structural implications, industry examples and the commercial upside.

Walt Disney once famously described his philosophy towards customers as: “Do[ing] what you do so well that they will want to see it again and bring their friends.” 

What Disney was describing – before it had been widely accepted or understood as a concept – was “customer experience”.

Customer experience was first introduced as a term by Pine and Gilmore; they concluded that successful businesses influence people through an engaging, authentic experience that delivers personal value.

Everyone can identify a great customer experience, yet it remains an elusive and subjective concept. Eric Jacques defines customer experience as “the sum of all experiences a customer has when dealing with a supplier of goods or services, over the duration of their relationship with that supplier”.

• It is well documented that it is cheaper to retain an existing customer than to acquire a new one or to win back a disgruntled one. Customer acquisition is six to seven times more expensive than retaining existing customers (Frederick F Reichheld 1996; Phil Chamberlain 2009)

• Poor service is synonymous with bad experience. Professor Rene T. Domingo estimates that about 96% of dissatisfied customers do not complain about the experience. Of those customers over 90% will not come back to offending organizations. Finally, each of those customers will tell their unforgettable experience to at least nine of their friends. In the era of the internet, multiply this number by one hundred or one thousand.

If you consider that customer retention is influenced by factors such as brand, product and service proposition, then customer experience is the primary factor in brand loyalty, acquisition and customer retention. Yet current organisational expenditure breaks down as follows (James Digby 2010):

• 55% is on new customer acquisition
• 33% is on brand awareness
• Only 12% is on customer retention

The implication is that the organisational obsession with gaining share by attracting new customers runs counter to the much more commercially enticing position of retaining who you have. And the way to retain them? Good customer experience.

Customers who are happy will share their views with friends and colleagues, on forums and blogs, and in an age of user driven content having an ever larger influence on customer purchase decisions, this is a customer retention and customer attraction goldmine. Get it wrong and it becomes a potential graveyard.

The biggest single component in effective customer experience delivery is people – the employees that interact with customers. Poor customer experience impacts employee satisfaction: increased complaints cause negative perception leading to low morale and increased employee churn rates.
 
So retaining your staff is important too, given that more experienced staff have greater knowledge of their business and are best equipped to deliver a positive experience. It is generally accepted that customers have great expectation of organisations; for example; customers require employees with strong product knowledge, e.g. advisory skills in banking industries, while organisations require employees with sales acumen and an ability to sell the right products to the relevant customer.

Organisations have a responsibility to foster environments that enable employees to learn and reapply their learning when directly engaging with customers. This should be replicated through all channels that connect with the customer.

Good customer experience has an indirect but crucial relationship with retaining your best people, reducing bottom line costs while enhancing employee productivity and satisfaction.

A recent study conducted by IBM in 2010 - comprising more than 1500 global CEOs – showed that successful CEOs make customer intimacy their number one priority. This finding is backed by The Temkin Group who in 2010 performed a survey of 140 large North American companies, segmenting them into two groups: top and bottom performers. They concluded that 82% of companies in the top performing group believe it's important to make their company culture more consumer-centred, whereas only 40% of the bottom performers thought in this way. Conversely, 68% of bottom performers lacked a structured customer experience strategy, compared with 33% of the leading companies.
 
The most successful organisations focus on customer experience as the day job, expressed through policies and values that may require cultural shifts in putting the customer first and adapting to new ways of working. Tesco’s tag line, “Every Little Helps”, is reflected in everything they do: how they communicate, how they expand their offer, their level of customer knowledge and their in-store experience.

Delivering a great customer experience is a proposition that most organisations attempt to establish and those that do it seek to protect. Customer experience is by no means novel, but so many organizations get it wrong. So how do you organize for the right customer experience, and more importantly, how do you sustain it?

In 1999 M A Jones researched customer experience in the shopping environment, concluding that good customer experience comprises the sum of factors (social, task, time, product variety of selection, financial resources, price, salespeople and store environment) which makes for the best customer experience in relation to individual shoppers.

So how does an organisation deliver this at an operational level? It is a combination of:

1. Strategy, policies, values and culture
2. Organisational structuring
3. Workforce planning and competency
4. Process measures and IT systems
5. Performance management

Although there is very little literature from Apple about their customer experience, Apple provides a great example how retailers can outperform existing rivals both within and outside their competitive set.

Marketing minds makes strong arguments concerning the connection between Apple’s brand strategy and customer experience further suggesting “leading brands like Apple combines their strategy with a focus on human emotion, providing an experience aligned to lifestyle: imagination, liberty (regained), innovation, passion, hope, dreams and aspirations and power-to-the-people. This is seamless accomplished through a combination of technology, simplicity, removal of complexity from people's lives, people-driven product design and a heartfelt connection with its customers”.
  
Apple depends on its customers to promote their experience with positive narratives, which hooks other customers into the signature Apple “lifestyle” that defines the brand.

Mike Wittenstien goes further to demystify Apple’s approach, segmenting Apple’s front of house experience with back of house operations and quotes: “Apple makes sure that each positive effect customers perceive front-of-house is supported by solid back-of-house operations”.
 
Others have been quick to adopt these lessons and transfer them to their own unique customer experience. On a very different end of the retail spectrum, Suit Supply (a European men’s retailer) demonstrates they have not only adopted customer experience best practices, but have retained traditional tailoring values blended with provocative imagery and technologies you might normally see in call centre environments. Suit Supply provides off the peg or cut to the bone services (suit alterations and made to measure suits), for personal and corporate customers. 

1. Strategy, policies, values and culture

Apple understands customer requirements, and provides products fit for purpose. The customer feels in control and confident in their purchase. Experts provide a friendly connection and deliver customer promises. Suit Supply provides for individuals and describes itself as “only [having] eyes for the customer, providing a personal touch”.

In both companies, the strategy is customer centric. But in order to deliver, consistency needs to filter through to all channels (telephone, internet as well as face-to-face) to provide the same customer experience and one organisational face.

2. Organisational structuring

Apple’s back of house operations align to their front of house operations; experts can process transactions through handheld devices without needing to visit tills, thereby avoiding queues. Suit Supply’s back of house operations are placed in the front of house where a tailor zips through suit alterations, demonstrating a visible commitment to customer experience.

Both organisations’ align service elements to strategy and operations. Clear distinctions are made between technical first line service with soft handoffs to even more technical expertise (Apple Genius and Suit Supply tailors) as the service requirements increase in complexity.

3. Workforce planning and competency
 
Apple attempts to ensure that internal resources match demand, and they keep customers occupied with visuals when supply exceeds demand. This gives customers the opportunity to try new products and for Apple to cross-sell. Suit Supply use trained craftsmen to complete technical elements at the point of sale, which are visible to the customer. 

In both cases, the feeling of control and confidence is reinforced by both customer and employee; moreover the customer feels they are in expert hands.

4. Processes, interfaces, IT systems

Payments can be made on the spot at Apple proving a seamless experience. Suit Supply captures information at any point during the sales process at any location within store, although there is a need to return to the cash desk to make final payment.

Organisations with technology that enables a smooth end-to-end process for the customer to reduce processing time are seen as customer centric, efficient and easy to buy from.

5. Performance management

Apple displays the queue time for appointments to manager customer expectations through clear communication. Suit Supply performance scoreboards list customer names and planned versus actual alteration completion time. Customer details are entered into handheld devices with completion times that feed directly into performance scoreboards.

Suit Supply’s unwritten, but enforceable contract promises that if alterations are not finished at precise times, i.e. if alterations exceed agreed completion time by one minute there is no charge to the customer. Suit Supply recognises there will always be glitches in the service and take active measures to eradicate anything less than perfect service. Appropriate rewards and incentives reinforce performance and are continually checked to ensure they align to customer experience.

The most successful brands tend to view customer experience as the “day job” of all of their employees. And while customer experience is widely understood – it is about promoting a culture that delights customers and grows the business - organisations that do it well must continually review and realign with changing customer needs to deliver the right experience, while organisations that do it poorly must find the magic formula. How to make this the culture of a company – and to make it stick – is the real challenge.

Ultimately, the biggest winners in a quickly changing consumer environment will be those companies that deliver outstanding customer experience. Those who choose to ignore this do so at their own peril.

On March 16th, the London Business School Human Capital Network and Molten Group will host the fifth conference of the Organisational Development Speaker Series – Customer Experience: Goldmine or Graveyard. Group-level Organisational Development and Customer Experience Directors from customer-centric industries - Retail & Consumer, Retail Banking and Telecommunications - will share their insights into how to best align organisations with market demands, not only to win over customers, but to sustain their loyalty in the long term.

Please, register for this event on http://humancapitalnetwork.blogspot.com
In the run-up to the event, Molten Group - www.molten-group.com – will present you with a series of articles on organising for customer experience.

The Human Capital Network - http://humancapitalnetwork.blogspot.com - is a discussion forum run by London Business School alumni that promotes debate on the latest issues in strategic change, organisational effectiveness and talent management. It has created the Organisational Development Speaker Series in order to facilitate discussion between HR practitioners and line managers. Some example topics addressed by previous events include Employee Engagement Strategies, Change-Ready Cultures and the Future of Work, and have featured speakers like Lynda Gratton (Professor of Management Practice at London Business School), Chris Bones (Dean of Henley Business School) and Paul Farley (Head of People and Organisational Effectiveness at British Airways).