Customer Experience (Part 1): Yes, it is an Experience
I’ve done a lot of thinking on customer experience lately and have concluded that generally speaking, people do not think enough about goods and services from an experiential perspective. No matter how medial the product or service, businesses must be thinking about what they are providing as experiences and not just transactions. I strongly believe that there are lots of opportunities to improve, optimize, and create new markets around customer experience. This post will be the first of several posts on the topic.
Apologies in advance for the theoretical and pseudo-mathematical approach to the issue in this first post, but in a world where customer experience is bucketed as being touchy-feely, I think it will help to think about it quantitatively to recognize its importance and real business impact.
Customer experience (which is directly related to the probability that a customer will return and retain), is a function of many things. I propose the equation below:
f(ce) = ßp*(p-pe) + ßt*(t-te) + ße*(e-ee) + ßs*(∆s) + ßsth*(∆sth) + ßlth*(∆lth)
OK, I know it’s been a while since we’ve seen equations and most of us can’t even remember what a regression is. But hear me out: What I’m saying here is that customer experience is a function of both measurable objective variables (in red), but also more subjective variables (in blue). The measurable elements basically are a function of how well the company performs against the consumer’s expectations of what price (p), time spent (t), and effort / convenience (e) should be. Each of these is weighed based on the relative importance (ßp , ßt, ße) for a particular industry or product. For example, for something like morning coffee, time and convenience might be paramount in experience relative to price (ßt, ße will be high), compared to something like buying a TV, where you might care more about price than convenience.
Whether or not they write it in a regression equation, companies are definitely aware of and differentiate along time, convenience, and price. However, few have succeeded in maximizing for the more subjective variables as well. Here, I have included stress (s), short-term happiness (sth), and long-term happiness (lth). Stress incurred is relatively straight forward—one might rationally choose to buy toilet paper at Walgreens for significantly more than Wal-Mart for example, because the stress of going to the large big box retailer and waiting in line outweighs the price paid. Short term happiness can be characterized simply as the ‘fun’ element, the happiness delivered while in the store, or while purchasing, that is not taken outside of the experience. The fun safety video on Virgin America for example, is such an example. Long term happiness is actual improvement in self-image, or happiness that is taken outside of the experience. For example, finding a pair of jeans that makes you feel great whenever you wear them, or feeling like your purchase has helped the world are feelings that fit into this category.
Let’s try this equation out on a couple of hypothetical purchases. Take, for example coffee and jeans. I’ve mapped out what relative importance might be for people—people care more about price of the exact same pair of jeans across retailers, while people might not care as much about price of the exact same cup of coffee. Time and effort are however more important for coffee than jeans. Long term happiness is a bigger factor for jeans, while short-term happiness is more important for coffee.
Now, if you assign scores to a number of different ways to purchase the exact same pair of jeans (you can buy at Macy’s with a slight discount, Gilt for a large discount, or at a very hands-on boutique for example), you can come up with an overall score of how customer experiences might vary across ways to purchase for both the jeans and the coffee.
While price, convenience, and time are obvious levers, people make purchase decisions that appear not to be rational on these three categories alone. Why, for example, do people buy jeans from expensive boutiques when they could buy the same items in department stores? Why would people favor an actual Starbucks location to a gas station selling the same Starbucks coffee? Or to brewing it themselves?
In fact, if you look to the second bolded column in this purely hypothetical example, you can see that failing to include subjective elements of customer experience might lead you to vastly different conclusions about customer preferences.
I’m sure my equation is not exhaustive and that there are many nuances along industry and product lines. But I think it is still effective in illustrating that it is important to think about your business’ customer experience.
What are the variables in your customer experience? What’s important to your customers? How are you making your customers react and feel? What are you maximizing now and what do you need to pay more attention to?
