What is customer experience and why does it matter?

Many experts like to say that customer customer experience is any interaction that customers have with a company. But some interactions matter more than others. The ones that matter the most have a measurable impact on the answers to these two questions:

What do your customers think about you?

What do your customers do based on their perception of you?

Why these two questions?

Because customer loyalty is the closest thing to a holy grail in customer experience and these two questions represent the two components of customer loyalty: “attitudinal loyalty,” which means having a favorable mental impression of a company, and “behavioral loyalty,” which means that they don’t just like you, they buy from you – and keep buying from you.

Research shows that attitudinal loyalty plays the biggest role in customer loyalty. If customers have a positive emotional outlook towards the customer experience, especially when measured against a competitor, they are more likely to buy from you and become loyal (repeat purchases). Research shows that customers’ evaluations of their experiences mirror the emotions they display during the interactions they have with companies as well as the feelings they experience after the encounter.

Isn’t customer experience just another name for customer service?

No. Customer service is just one slice of the customer experience. Customers only contact customer service when they have a problem.

So what should be my goals for improving customer experience?

You want them to like you, really like you. A positive attitude toward your company and its products or services has direct ties to customer loyalty and satisfaction. So any efforts that you make to improve customer experience should be considered in terms of how they make customers more satisfied and more loyal. If they are more satisfied with the experience you offer leading up to the sale than competitors, they are more likely to buy from you. If they feel more loyal, they are more likely to buy from you repeatedly.

However, it’s important to keep in mind that satisfaction does not necessarily lead to loyalty. For example, a customer could be satisfied with her experience with you but if a competitor offers something comparable or better she may buy from them next time. Customer experience efforts should drive towards making you customers’ preferred choice. (This distinction between satisfaction and preference is what has helped Frederick Reichheld make millions with his Net Promoter Score methodology.)

But what if my company only sells to a customer once or infrequently? Why should I care about experience and loyalty?

Because even a single positive experience can be expressed in other ways besides repeat purchases. For example, happy customers can give you positive recommendations on websites or in social media or by recommending you to others via word of mouth.

How do I know whether my customer experience needs improvement?

You can’t necessarily trust your customers to tell you. Few will take the time to complain or fill out a survey (especially online); they’ll simply go to a competitor, or worse, social media to complain. Better to ask your self these questions:

Is our market share slipping?

Is it costing more to acquire new customers?

Are we losing existing customers more rapidly (churn)?

Are we getting fewer recommendations and favorable reviews online and in social media?

How much pain would our customers have to go through to switch to a competitor (switching costs)?

Getting the answers to these questions will not only help determine the current quality of the customer experience, but will also form the basis of a business case to do something about it.

How much do my actual products and services factor into customer experience?

Unfortunately, You know product cycles are getting shorter and automation and globalization have made it much easier for competitors to crank out “good enough” substitutes.

But even for highly complex products and for services, the quality of the customer experience often matters more. Research has found that in some cases, customers would rather buy an inferior (though good enough) product that comes with a superior relationship than a better product that does not.

What are the most important components of the customer experience?

It’s not so much the individual components themselves, such as a Web site or a call center (though those are certainly important); it’s more about whether the individual touch points contribute to creating a positive impression in customers’ minds. Here are the building blocks for creating that impression:

ِِ1- Trust: Trust is the foundation of a positive customer experience. If customers don’t feel that they can trust the interaction points (say a Web site) or the company behind them, they will be less likely to purchase. Research says that trust consists of two main components:

A- Confidence: Customers must believe that the company has the ability to provide a quality product or service.

B- Benevolence: Customers must believe that the company is willing to consider customers’ self-interest above their own.

C-Low effort and sacrifice: Customers want their interactions with companies to be free from delays and extra effort. Another issue is the tradeoff between what customers want and what companies are actually capable of providing.

2- Positive emotion. Emotion shows up again and again in the research as being the most important factor in the customer

3- Relationship. Positive emotions are necessary to build satisfaction and long-term loyalty while negative emotions can destroy in a few moments relationships that companies have invested years in building.

4- Personalization. Though this is a relatively new and controversial area, research shows that personalizing the customer experience in the right ways creates positive emotion and leads to more satisfaction and loyalty.

How good does my customer experience need to be?

In any relationship with a company, customers expect that their interactions will require as little effort as possible to get what they want. This means that companies have to make the experience smooth, reliable, and efficient. If, for example, customers are shuttled among three different departments (all asking for their customer numbers) before they can accomplish a typical transaction, then the experience generates negative emotion (frustration) and leads to reduced sales and loyalty.

How do I determine how much I can or should spend to improve customer experience?

If, through competitive analysis and surveys of customers, it’s clear that your customer experience lags behind your competitors then improving customer experience should be considered part of the cost of doing business. Customers can research you and your competitors much more easily now through the web and social media. The holes in your experience will be revealed, causing negative emotion and an exodus to competitors.

Where should I begin to improve the customer experience?

Removing the bumps in the road that cause customers to expend extra effort is the best place to start. Research found that moving customers from rating the experience “below expectations” to “meets expectations” gave companies as much economic value as customers who said their expectations were exceeded. So just fixing the existing potholes in the experience will go a long way.

To do this, companies need to look outside by surveying customers about their experiences. Companies also need to look inside by surveying employees (and partners and external providers), about the frustrations they encounter in trying to accomplish their roles in the customer experience.

What role should employees play?

Employee emotions are as important as customer emotions in the customer experience. Employees and managers who feel unable to do their jobs as they perceive they should be done – and feel powerless to change the situation – become unhappy and less able and willing to put out the effort it takes to keep customers happy. Rather than speak up about problems, they simply focus on doing what they are told, “culture of compliance.”


Yet let’s not be too hard on employees and managers here. An individual employee or manager may not be able to tell where the bumps in the road are. Employees may be happy and feeling confident about their contributions while being completely unaware that they are in fact causing problems further down the line because they are isolated from the rest of the experience process and can’t see the negative impacts.

So how do I identify where the problems are in the customer experience?

Most companies begin by mapping out the customer experience both in terms of how customers interact with the company and the internal processes designed to make the experience flow smoothly. You also have to capture all the processes that happen outside your company, with partners and outsourcers. Having a holistic view can reveal where failures are occurring and form the basis of the case for change.


To create the map, you need your most knowledgeable process participants; ideally, those who have unbroken visibility out to what customers experience, as well as to the internal processes and experiences of employees and managers. Where the line of sight is broken, bring in people who can fill in the gaps. This is best done as a group exercise using the proverbial whiteboard and sticky notes, so that everyone has the opportunity to comment and contribute to determining where the problems are and debunking myths about where people might have thought the problems were, but weren’t.


Of course, this all presumes that the different areas involved in the customer experience in your company are even speaking to one another, much less willing to collaborate on fixing problems. Old habits, old grudges die hard. There should be a high-level executive leading the customer experience change effort, one who is a charismatic, and who has a direct mandate from the CEO to get everyone to play nice with each other.

What is the role of digital in improving the customer experience?

Digital channels and processes play the most important roles in pursuing the goals of speed and convenience and reducing customer effort. Of course, fixing existing problems with the digital experience (not just for customers but also for employees) is easier said than done because it is expensive and time consuming. Many of the systems that customer service representatives use in call centers, for example are very Old.

Should I look for a certain type of person to fill roles in the customer experience?

For those who interact directly with customers, yes. Research says that extroverts do better in customer experience roles because they are more naturally inclined to want to interact with others. But these extroverts should also have the ability to do three things:

1- Regulate inner emotions.

2- Tolerate.

3- Enjoy helping others.

In combination, these factors give employees extra endurance when it comes to dealing with people and more ability to suppress inappropriate behavior (even when customers deserve it).

How should I train employees to act during the customer experience?

companies should focus on training employees to offer two things:

1- Treat customers with empathy: This means hearing customers out and treating them with dignity and respect at every point in the interaction and acting to defuse emotional tension – without having to put on false emotions such as a painted on smile.

2- Offer customers justice: Employees need to get on the same wavelength as the customer to determine what would constitute a just outcome for the experience in the customer’s mind and then weigh that against the limits the company has set on the experience and come to a mutually agreed upon resolution.

To what extent should I try to replace the human customer experience with a digital one?

There’s clear evidence that digital contributes a lot to making the experience easy and fast, especially in transactional types of relationships such as buying a book, which customers like. Digital is also great for information-intensive experiences, such as complex products and services that require customers to do a lot of research before buying. And of course, digital experiences are much cheaper for companies, though most surveys show that companies do a poor job of managing them — especially when it comes to coordinating across digital and human channels.


Digital may be great for easy, but we still need humans for when things become hard. Research shows that customers place a high value on the quality of the relationship they have with companies.

How do I determine the ROI of customer experience improvements?

Unfortunately for customers, there’s really only one measure that matters: switching costs. If there are no viable alternatives in the market, or if switching to a competitor would cost more than the product or service itself or involve so much customer effort that it doesn’t seem worth it, customer experience becomes less important to revenues.

Loyalty over time matters

But let’s assume that you are in a competitive industry. The most important impact that a good customer experience has is in customer loyalty. Because it costs more to acquire new customers than to maintain relationships with existing customers, most experts point to loyalty as the decisive metric. More specifically, they cite lifetime customer value – usually computed as the revenue from each customer over the length of the relationship.

There are Three other metrics to consider

three areas where companies can benefit from improved customer experience that are slightly easier to measure :

1- More incremental purchases from existing customers.

2- Higher retained revenue as a result of reduced churn.

3- New sales driven by word of mouth.