Customer ExperienceBrands are struggling to truly listen to their customers and leverage key insights, according to Loyalty360’s second annual CX Landscape: State of the Industry Report.

Loyalty360 CEO and CMO Mark Johnson and Emily Heitkamp, Loyalty360’s VP of Marketing, discussed the report with Narina Snippy, CMO of Stellar Loyalty during a session on Wednesday at the Engagement & Experience Expo, hosted by Loyalty360.

“Brands struggle between hearing and listening,” Heitkamp explained. “Doing something with it effectively is a struggle. They’re collecting the data, but struggling to leverage it effectively. Brands are aligning more toward the way customers think of the brand.”

Johnson said that the challenge of listening is “so pervasive, but so simple. Brands are challenged to listen to and understand their customers.”

CX budgets are growing, but there is a gap between brand priorities and adoption levels and an ongoing challenge of internal alignment.

“Internal alignment, hands down, was the biggest challenge for brands,” Heitkamp said.

Marketers told Loyalty360, according to the CX Landscape report that customer insights are a main component of customer experience strategies.

“Yet data and internal platforms are among the biggest challenges reported,” the report says. “The technologies and platforms that pledged to solve the problems of customer data and customer experience have created confusion and frustration.”

Johnson said that brands are struggling with technology providers.

“There is so much complexity now that it’s very hard for them to do,” Johnson said. “Brands want a standardized set of metrics.”

Changing organizational cultures and processes to rally around the customer has proven to be difficult for many brands.

“There is also a challenge to identify meaningful benchmarks to truly gauge what’s working and what’s not working in this new customer experience paradigm, where a customer expects each and every touch point to be relevant and delightful,” the report says. “In spite of, or perhaps because of these struggles, brands are increasing their prioritization of customer experience as a critical strategy for growth. Some customer-centric brands are making strides to deliver customer experiences that build authentic customer loyalty, while others are scrambling to keep up. How are they doing it, what challenges have they overcome, and what are roadblocks to continued success?”

The CX Landscape report comprised an online survey that polled more than 150 brands, representing companies of various sizes and a broad spectrum of industries, between Sept. 16–Oct. 27, 2015. The study evaluated CX budgets, definitions and scope, as well as metrics, performance, techniques, tools, and challenges.

“At its most basic level, customer experience is being defined in a very broad and comprehensive way by brands–budget allocation and prioritization are following suit, yet simplification is lost when drilling into strategy and execution,” the report notes. “The definition of customer experience continues to evolve and grow. Most brands define customer experience as an infinite number of interactions with a brand, at all phases of the customer journey. Budgets are on the rise accordingly. Over half of brands reported that CX budgets have increased year-over-year, with a notable portion reporting sizable increases. As a result, customer loyalty is the outcome most-expected of customer experience strategies.”CX Landscape

Aligning all parts of the organization around this new definition is critical.

“Internal alignment is the biggest challenge being reported and executive buy-in is also a common struggle,” according to the report. “In an environment where all groups across an organization must work toward the goal of delivering an experience that results in customer loyalty, alignment and directive from the top are critical. Brands say this is a major hurdle to overcome.”

Brands want to identify meaningful metrics and benchmarks.

“Measurement is focused on customer satisfaction and net promoter scores,” the report says. “Even though brands expect customer experience to build loyalty, short-term metrics are used more often than longer-term metrics like customer retention or customer lifetime value. Internal benchmarks are most often used, rather than comparisons to industry standards or competitors.”

Understanding the customer is important, yet taking action on the insight is what matters.

“Brands are placing high importance on customer insights and leading-edge CX techniques, like personalized experiences, advanced analytics and consistency across touch points,” the report says. “Yet many are challenged by internal platforms and data; just a minority of brands is adopting such techniques and use of emerging channels for engagement has not lived up to expectations.”

A surprising statistic centered on personalization: Nearly two-thirds of brands reported that personalized experiences are very important to their organizations, but just 22% said personalized experiences are fully adopted or heavily adopted by their organizations.

“Adoption is lagging behind in personalization,” Heitkamp said. “We will understand this more as we drill deeper into further research.”

Most brands (69%) said that customer experience encompasses all interactions a customer has ever had with a brand, compared to just 27% that defined CX in this way in 2014. Similarly, 64% of brands surveyed said that customer experience happens across the entire customer journey, compared to 62% in 2014.

Customer loyalty is the most expected outcome of customer experience strategies, reported by just under 40% of brands surveyed. Outcomes most closely tied to financial impact, such as sales/revenue, ROI, and profitability are prioritized by fewer organizations.

Nearly half (42%) of brands do not have a specific customer experience budget, which means that resources directly impacting customer experience are spread across multiple parts of the budget.

At those companies where a specific customer experience budget exists, most companies include expenses related to developing an understanding of the customer, including customer feedback (60%), customer insights (60%) and market research (42%). Customer service expenses (57%) are more commonly included in customer experience budgets than marketing (39%).

Customer experience budgets increased year-over-year for 58% of respondents, compared to 50% of respondents who reported an increase in marketing budgets, the report noted.

A struggle to meet customer experience goals continues to be prevalent in 2015. In fact, fewer brands reported success in meeting and exceeding CX goals, compared to 2014. Just 38% of companies said they are meeting or exceeding goals in 2015, compared to 49% in 2014.

Brands are mostly focused on internal benchmarks to determine performance against goals (57%). A small portion of brands (16%) indicated they are doing performance benchmarks in a comprehensive internal and external way, comparing performance against internal benchmarks, industry averages, and competitor benchmarks.

Nearly all brands surveyed use metrics to track customer experience. Customer satisfaction, typically considered a short-term metric, is most frequently used, yet most brands are also looking at longer term and more complex measurements such as net promoter score (53%) and sales/revenue (52%).

Customer insights and analytics are most heavily adopted tools and techniques, yet brands say they are less important.

Interestingly, brands are placing less importance on mobile apps, identification of hidden trends, and micro-segmentation. These tools are also less widely adopted. Traditional customer communication channels, like call center and direct mail, are reported to be more effective than digital channels like Facebook and Twitter.

“One of the biggest surprises for me was the use of mobile apps,” Heitkamp said. “Why aren’t more brands using them?”

Challenges related to proper execution of customer experience have emerged as the most critical in 2015, the report revealed. The number of companies challenged by internal alignment, seamless omni-channel experiences, and internal platforms has increased from 2014, while differentiation and measurement challenges have declined.

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