Saying that you are dedicated to customer centricity sounds admirable right up to the moment that you realize just how insatiable customers are.
Originally published on GreenBook, April 2021.
When you say, “customer experience” (CEX), I think of the economic benefit that the organisation derives from repeat purchase or continuing subscription. I think of non-financial lead indicators such as retention. However, when you say happy, satisfied, surprised and delighted consumers who are elated with their frictionless experience I think ideology, opacity and static or declining organisational outcomes. Above all, I think of a misallocation of scarce resources and the rising cost of CEX as the organisation seeks to fulfil every whim of each customer.
Beyond the cost to deliver, another expense is the growth of CEX professional fees. These colleagues tend to be conscientious, hardworking, and bordering on vocational in their determination to help the organisation improve. They rise each morning believing that their efforts will result in a better outcome for the customer and therefore, the organisation. However, despite organisations embracing customer centricity – backed up with the increase in CEX investment – in most instances organisations have found that the cost to serve is rising meanwhile, churn rates have plateaued, and acquisition objectives seem relatively impregnable.
It is not fashionable to proclaim that we are “selectively customer centric.”
Saying that you are dedicated to customer centricity sounds admirable right up to the moment that you realise just how insatiable customers are. In the absence of a rationing mechanism for customer experience (CEX) investment, running faster with more initiatives will needlessly raise costs and raise customer expectations. The higher customer expectations often flow into category expectations which means not only does an overabundance of CEX initiatives needlessly raise your costs with little compensating return, but you have most likely raised the costs for competitors too. In this context, the term CEX ‘initiative’ is used to refer to a stream of work expected to eradicate customers’ pain points and therefore raise the organisation’s level of customer centricity.
No organisation should pursue the position of being entirely ‘customer centric’. There is a diminishing return which means that at some point, the marginal benefit of being customer centric is less than the marginal cost. At that point, seeking to be more customer centric diminishes organisational and shareholder value. Based on what Forethought encounters, most large organisations have expansive CEX programs that are too broad to bring about any meaningful change in the organisation’s growth trajectory.
No organisation should pursue the absolute position of being customer centric.
You cannot efficiently address negative organisational outcomes such as loss of customers unless you know with mathematical certainty, which organisational practices lead to the consumer behaviour, in this case, defection.
Not all consumer pain points are equally detrimental to the organisation and therefore warrant the same level of investment or focus. It would be idealistic, but reckless to the organisation’s prosperity, to eradicate every point of friction. This seems a rather obvious statement except, based on our broad experience, it is uncommon for organizations to have quantified with any rigour, which pain points lead to what organisational objectives and outcomes. “Squeaky wheels” and the loudest voice wreak havoc when an organisation’s CEX resource allocation is not based on rigorous CEX science-based analytics.
It is uncommon for organisations to have quantified with any rigor, which pain points lead to desired organisational outcomes.
Doubly troubling: if you are unable to quantitatively attribute behavioural change and therefore, quantify the benefit of addressing a pain point, then on what basis was a remedial initiative approved for investment? It is difficult to conclude anything other than intuition and judgement are the most common modus operandi in CEX management. This has resulted in a hefty overhead for organisations that treat CEX management as a philosophy rather than an efficient allocation of scarce resources to drive desired organisational outcomes.
It is not fashionable to proclaim that we are “selectively customer centric” however, the economics of the organisation dictate that such a proposition is optimal. The question should be, which CEX initiatives will make a substantive difference to both the organisation’s prosperity (usually in the form of retention) and the utility the customer derives from your services? If your answer is any more than just a handful of initiatives, then you are most likely using the incorrect mechanism for filtering the prospective initiatives.
Ken Roberts is Executive Chairman and founder of Forethought.