In today’s digital-first, on-demand world, customer loyalty is becoming increasingly difficult to retain. As the growing influencer market exposes consumers to a nonstop feed of emerging brands, a looming recession has put more pressure on customers to limit spending. Meanwhile, an increased emphasis on efficiency has left companies with little room for error when interacting with customers—and even the smallest inconvenience can prompt a customer to switch to a competitor brand, often without a second thought.
To better understand the impact of customer experience on loyalty today, I caught up with Stanford Swinton, founder of NPSx, a Bain & Company-backed provider of CX training and tools. With 15+ years of experience in customer-centric change and innovation, Stanford has closely watched CX evolve from an engagement opportunity into a pillar of modern business. We discussed this evolution while exploring changes in CX ownership, the role of AI in CX, and the steps that brands must take to maintain customer loyalty amid what Stanford calls the “third wave” of customer experience.
Gary Drenik: What exactly is the “third wave” of CX and when did it start?
Stanford Swinton: The early 2000s saw the first wave of CX, when the Net Promoter Score (NPS) was introduced as a universal metric to represent customer experience and loyalty. Businesses at this time began implementing balanced scorecards and other tools to ensure this metric was being captured alongside the profit and loss metrics of a business.
The second wave of CX was all about understanding the customer sentiment that’s been captured, creating feedback loops, and adopting feedback management platforms to help disseminate learnings throughout organizations—particularly to customer-facing staff. This wave largely gave rise to a focus on developing experiences that removed customer pain points and adhered to general standards of CX “hygiene” for all customers. It also saw NPS, and the Net Promoter System become the global standard for how companies listen to and learn from their customers.
We’re now in the third wave of CX, which centers around the prediction and personalization of individual customer experiences. This started amid the Covid-19 pandemic when social distancing and work-from-home trends sparked a massive acceleration in the digitization of CX, prompting brands to adapt their products, services, and channels for remote environments. This digital migration unlocked new opportunities for the personalization of experiences on a much more intimate level, while opening up new disciplines in data and lifecycle management.
Drenik: Whose responsibility is it to deliver a positive customer experience in this third wave?
Swinton: CX is no longer something that can be offloaded solely to a customer service team, or developed in siloed departments like pricing, product, or communications. We know that customer needs extend beyond these silos, and every person across an organization should feel like they have a direct line of sight to the customer, regardless of their role.
The third wave and digital shift means that for the first time, a majority of customer experiences are being developed “off stage” by engineers and product teams, rather than “on stage” in human channels. This broadens CX ownership and requires new ways of working to manage experiences end-to-end through the customer journey. Customers want brands to deliver a consistent, positive experience at every touchpoint, which requires teams to reorganize, train, and work cross-functionally to deliver a common target experience.
And while artificial intelligence becomes more ubiquitous in CX, organizations must leverage AI to enhance relationships with customers, not manage them. According to a recent Prosper Insights & Analytics survey, customers across every adult demographic overwhelmingly prefer to connect with a live person over an AI chatbot when seeking customer assistance regarding virtually any service, from banking to healthcare and travel. Overall, 56.1% of adults aged 18+ found “live,” toll-free customer service to be important or very important to their online shopping experiences—even more than same-day delivery.
Drenik: The rapid pace of tech innovation has caused customer loyalty to fade in recent years. Why is this, and what role does CX play in regaining loyalty?
Swinton: Technological disruption has not changed the fundamental importance of loyalty in ensuring business growth and sustainability. Now more than ever, loyalty—which correlates to top line drivers such as retention, product holdings, and referral rates—is critical to success.
What we are seeing in historically staid industries like banking or utilities, however, is not that market leaders have lost their customers’ loyalty, but that they never had their customers’ loyalty to begin with. As innovative market entrants challenge the status quo, many customers are leaving their long-time providers and establishing relationships with brands that may be more aligned with their values. That said, the most successful brands today recognize that there is no silver bullet to regaining loyalty, and that strategic utilization of AI and data within CX is the only way to outpace competition.
Notably, we have seen that market leaders in customer sentiment outpace the laggards on growth across virtually every industry. In most cases, these market leaders have materially differentiated their CX against all competitors in at least one area of experience (e.g., convenience). A 2023 “State of CX” report of UK Consumers, co-authored by NPSx and InMoment, shows that the brands with NPS over 40 are often growing faster, gaining more market share, and drawing more public attention than their respective industry peers.
Drenik: Is NPS still the best metric to use in 2023? How should a company’s relationship with NPS change amid this third wave?
Swinton: As the longtime standard for measuring customer sentiment, NPS retains an essential role in the balanced scorecard of brands today. That said, many companies misuse or over-rely on NPS. While the metric is valuable, it only ever reflects a sample of customers who respond to surveys—and that sample can be as low as 5-10% of an organization’s customer base.
With the help of AI and other modern technologies, companies can move beyond simply measuring NPS and categorizing verbatim, to using NPS as an input for an intelligent system that can identify all customer sentiment and assess which lead operational indicators are driving their customers’ experiences. Leveraging an effective AI model with strategic customer segmentation, for instance, can elevate a company’s use of NPS as part of their reporting dashboards.
Drenik: What can companies do to stay ahead of the curve and maintain loyalty as CX evolves in years to come?
Swinton: Brands must focus on at least four things to stay ahead of the curve:
- Centering their company’s purpose and culture firmly around delivering exceptional customer experiences.
- Investing in a customer intelligence capability that combines robust feedback with rich customer data sources, predictive analytics, and AI (for use cases such as personalization).
- Organizing teams to work cross-functionally to deliver integrated seamless experiences.
- Ensuring experiences and products are truly differentiated and deliver value to customers in a way that is unique and authentic.
CX is ever-changing, and the sooner companies follow these guidelines, the more prepared they’ll be for shifts in years to come.
Drenik: Thank you Stanford for sharing these insights on loyalty and predictions for the future of customer experience. CX is a foundational tenet of organizations across any industry, and I’m eager to watch its evolution continue.
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