The Three "Ds" of Customer Experience

Eighty percent of companies believe they deliver a superior customer experience, but only 8 percent of their customers agree, says Bain & Company. Here's how to repair the disconnect.

by James Allen, Frederick F. Reichheld, and Barney Hamilton

Call it the dominance trap: The larger a company's market share, the greater the risk it will take its customers for granted. As the money flows in, management begins confusing customer profitability with customer loyalty, never realizing that the most lucrative buyers may also be the angriest and most alienated. Worse, traditional market research may lead the firm to view customers as statistics. Managers can become so focused on the data that they stop hearing the real voices of their customers.

A recent Bain & Company survey reveals just how commonly companies misread the market. We surveyed 362 firms and found that 80 percent believed they delivered a "superior experience" to their customers. But when we asked customers about their own perceptions, we found that they rated only 8 percent of companies as truly delivering a superior experience. Clearly, it's easy for leading companies to assume they're keeping customers happy; it's quite another thing to achieve that kind of customer devotion.

So what sets the elite 8 percent apart? We found that they take a distinctively broad view of the customer experience. Unlike most companies, which reflexively turn to product or service design to improve customer satisfaction, the leaders pursue three imperatives simultaneously:

1. They design the right offers and experiences for the right customers.
2. They deliver these propositions by focusing the entire company on them with an emphasis on cross-functional collaboration.
3. They develop their capabilities to please customers again and again - by such means as revamping the planning process, training people in how to create new customer propositions, and establishing direct accountability for the customer experience.

Each of these "Three Ds" draws on and reinforces the others. Together, they transform the company into one that is continually led and informed by its customers' voices.

Designing the right propositions
Most large companies are adept at dividing customers into segments and designing value propositions for each one. But those that deliver a truly outstanding customer experience go about the design business in a unique way. In defining segments, they look not only at customers' relative probability but also at their tendency to act as advocates for the company, to sing its praises to friends.

Theultimate goalis to shift ever more customers into the high-profit, high-advocacy area. Customer advocacy can be summarized as a net promoter score, calculated as the percentage of customers who would recommend a company (the promoters) minus the percentage that would urge friends to stay away (the detractors). Because such a simple measure is understandable to all parts of a company, it can serve to rally and coordinate the entire organization. As described in the sidebar "Thinking Clearly About Customers," the ultimate goal is to shift ever more customers into the high-profit, high-advocacy area.

Of course, the experiences that turn passive buyers into active promoters will vary by customer segment. What captivates one group may turn off another. In formulating segments, therefore, it's important to look beyond basic demographic and purchasing data to discern customers' attitudes and even personalities.

In designing propositions for specific segments, leaders focus on the entire customer experience. They recognize that customers interact with different parts of the organization across a number of touchpoints, including purchase, service and support, upgrades, billing, and so on. A company can't turn its customers into satisfied, loyal advocates unless it takes their experiences at all these touchpoints into account. Design is thus closely tied to the delivery from the very beginning. Planning focuses not only on the value propositions themselves but on all the steps that will be required to deliver the propositions to the appropriate segments.

Delivering value to the customer
The most brilliantly designed and insightful customer offerings can be rendered impotent by poor execution. To ensure effective delivery, the leaders must first create and motivate cross-functional teams - from marketing to supply chain management - to deliver their value proposition across the entire customer experience. Second, they must treat customer interaction as a precious resource. Data mining and customer relationship management (CRM) systems can be valuable for creating hypotheses, but the ultimate test of any company's delivery lies in what customers tell others. The best companies find ways to tune in to customers' voices every day.

Customer metrics serve an equally critical function: They allow companies to be sure their delivery continues to meet the needs of the target segments. But traditional metrics, focused on the performance of individual functions, aren't enough; measures have to be crafted to inspire cross-functional collaboration.

One example is net promoter scores: Improving them requires a concerted effort from the front line to the back office. Precise customer service objectives for specific customer interactions can also help to rally the troops. A bank might create a goal of phoning each new customer within one week of opening a checking account; a cable company, within a week of installing a line. Hitting such targets requires specific, coordinated contributions from customer support, marketing, channel management, and finance.

Developing the capabilities to do it again and again
Customer value propositions can never be static; they must be subject to regular innovation. It's the same with delivery - every company must improve its performance quarter after quarter, year after year. Leaders in crafting the customer experience have established a number of capabilities to achieve this kind of systematic innovation and improvement. They include:

• Tools that aid customer-focused planning and execution.
• Customer-based metrics and closed feedback loops that establish accountability.
• Customer-focused management incentives. Net promoter scores, for example, are increasingly used in performance reviews.

Top-performing companies also create processes that seek direct, immediate customer feedback - not simply to ensure that things are going well but also to build in methods of systematic innovation and improvement.