Many brands think about customer experience as a cost center which makes it one of the first items to receive operational cuts in uncertain times. What if we turn this thinking around and explore customer experience as a revenue driver instead?
Table of Contents
Introduction – Customer Experience
Revenue success is never a certainty in any industry. Many brands produce high-quality products and services only to meet with little engagement and customer acquisition. Before we dive into turning customer experience into a revenue driver, let’s explore why the concept is a cost center for many companies.
What is customer experience?
Customer experience refers to the overall perception of customers of their interactions with a company or brand, including all the touchpoints and interactions throughout their journey. These touchpoints and interactions usually go through a cycle of engagement (initial awareness from an advertisement or organic research), acquisition (purchase of products or services), onboarding (use of products or services), and maintenance (support from customer service teams and post-purchase feedback).
The concept of customer experience traced back to many centuries ago when commerce was invented by businesses to cater to customers’ daily needs. Business owners would observe that good customer service (which could be as simple as remembering customers’ names and previous order details) would yield loyalty and additional revenue through upselling or bigger purchases. That’s one of the reasons why customer service still plays a role in how customer experience touchpoints are designed.
The term “customer experience” gained more popularity in the late 1990s and early 2000s as companies began to build a holistic approach to serving customers beyond service-based interactions. They found that existing and would-be customers are the most satisfied and are more willing to contribute revenue through purchase when their needs are consistently met through the cycle described above (especially when quality and price are similar to competing brands).
For example, customers who see a juicy hamburger ad on television would be the most satisfied when the burger they purchased looks relatively the same. The further away the end product is from the ad copy, the more they feel less about the perceived value of the product versus spend. Quality of the burger, price, location, service, etc. are also variables customers would consider, in this simple example.
Today, with omnichannel footprints being the defacto approach to customer engagement, it is essential that customer experience is consistent across the fourth main stages of the cycle.
How To Account For Customer Experience – Cost Versus Revenue
Creating a positive customer experience process takes a village of dedicated professionals who assess the current state, collect revenue signals and data (e.g., transactional, observational, purchased, or feedback-based), build/monitor key success indicators, and design/improve processes. While the goal of many companies may be to gain revenue success with great customer experience, they often slot customer experience management or operational excellence as a cost of doing business rather than as a function of building revenue.
It is not surprising that customer service, a component, and part origin to customer experience, is viewed as a cost driver. Previously, customer service departments especially contact centers were managed by marketing or operational teams. Their work focused primarily on resolving issues than building value. There is also a lack of data supporting how revenue is generated as a function of the customer service performed.
Today, with more data available for companies and brands, key decision-makers should move beyond the “customer experience as a business cost” concept and into the “customer experience as a revenue success” concept.
Why? Using a growth mindset to customer experience opens up opportunities for companies and brands to innovate with a focus on building customer relationships that translate into additional revenue. After all, costs can only be reduced to zero but revenue can be infinitely generated.
How To Build Revenue Success With Customer Experience?
86% of consumers surveyed mentioned that they are willing to pay more to receive a superior customer experience. And 64% are more likely to recommend the brand if they have a great experience, leading to increased referral business and higher return on investment.
Many brands like to use the word “personalization” when discussing the relationship between customers and revenue. Rightfully so, automated or manual personalization may inspire customer(s) to purchase. However, the concept itself may not be enough to drive customers to the finish line. What should brands do to improve the odds?
Translating Engagement Into Purchases – When It Works Well (Case Study: Sephora)
The pandemic will be known for popularizing virtual meetings on platforms like Zoom, Microsoft Teams, Google Meet, etc. People working from home have to manage poor video quality, lighting conditions, and what clothes to wear.
For many, being/feeling presentable may include wearing makeup. It is an item that is better seen or touched in person. When the option to visit a Sephora store was unavailable due to COVID restrictions, many customers were visibly frustrated.
The beauty retail chain saw and listened to these concerns and thought of a brilliant idea. Instead of asking customers to go to a store, why not bring the store to the customers? Augmented reality, beauty advisor virtual calls, and live streaming were progressively introduced from 2021 onwards to improve engagement and reduce the “distance” between customers and Sephora.
These touchpoints drove overall engagement higher and contributed to the record-breaking 2022 revenue and profits for the company and its parent, LVMH.
Translating Engagement Into Purchases – When It Doesn’t Work As Well (Case Study: Volvo)
Vehicle sales have been a bright spot in the retail industry over the past few years. Chip shortage, vehicle unavailability, and inflation-fueled price increases have not dampened sales, as some suggested. Tesla has proven over the past ten years that consumers are willing to buy vehicles without going into a dealership or conducting a test drive.
Traditional automotive manufacturers are not standing still. Beyond moving into electric vehicles, they have been exploring selling stock through partnerships. One example is Volvo and Costco. The warehouse shopping chain has been selling vehicles in the United States since 2007. Its relationship with Volvo was cemented in 2019 which brought more visibility for both brands.
For the 2023 promotion, Costco members can get up to a US$2,500 rebate for selective models on top of manufacturer offers. The exclusive deal should activate cross-brand shoppers.
However, when checking the websites of both brands, there is no direct mention of the promotion. Additionally, Volvo vehicles are not showcased at Costco locations to build awareness. This reduces engagement potential and overall revenue generation.
Building Revenue Is Not Easy
Engagement is one of four components in the customer experience cycle. However, it plays a role in customer management. The right amount of engagement should be designed to find the balance of building customer relationships without overwhelming them with too many interactions. Brands would find success by having a revenue mindset through customer experience.
Should we engage?
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