We are in the age of the customer. As Forrester Vice President Moira Dorsey noted in 2012, “the only source of sustainable competitive advantage is customer experience. Delivering experiences that meet or exceed customer expectations is worth real money.” Dorsey also mentioned, “For five years, we’ve been conducting a large-scale consumer study called the Customer Experience Index (CXi), which shows that customer experience drives profits. Over a recent five-year period, a group of customer-experience leaders from our CXi grew by 22.5%, while the S&P 500 market index fell by -1.3% and the laggard portfolio dropped by -46.3%.” With results like these, it’s clear why companies are now focused on defining, investing in, and managing their customers’ experiences.
So why has this new battleground for gaining a competitive edge become so centered on the overall customer experience instead of just optimizing individual programs? One reason is that everything else is rapidly becoming a commodity. Aspects like design, manufacturing capabilities, distribution strength, and data usage, which used to be competitive advantages, are now becoming accessible to everyone. The second, and possibly more significant reason is that customers now have more power than ever before. The rise of online communication tools, such as social networks, review sites, and mobile apps, has empowered current and potential customers to compare, research, discuss, and evaluate every interaction they have with a brand’s product or service.
In this highly competitive market, fighting to acquire and retain these newly empowered customers is going to require innovative thinking. Many companies are going to need to rethink what customer loyalty means to their business. Simply rewarding transactions is no longer enough for many customers. Consumers have always had choice about where they spend their money; now they also have another choice. They can choose what they say about the experience of making that purchase. Put simply, it is just as important to measure and reward customer advocacy as it is to reward repeat purchases.
Forrester’s research into “the Age of the Customer” suggests the trend started in 2010. The Age of Manufacturing lasted from 1900 to 1960. The age of distribution where global transportation was the key factor for scale lasted from 1960 to 1990. More recently the Age of Information where supply chains were dominated by those who controlled the flow of data lasted from 1990 to 2010. Nobody knows just how long the Age of the Customer will actually last but if these past examples are anything to go by it’s likely to be a trend that may last for 10 years.
The experience you design and manage for your customers is now your biggest challenge and your greatest opportunity. Customer advocacy can no longer be a guessing game. It needs to be systemised. It needs to be be pulled into loyalty programs and rewarded. Integration of loyalty and advocacy will become the foundation of a winning customer experience.