Managing the Value in Customer Experience

Managing the Value in Customer Experience

Friendly debates on the definition of customer experience never seem to end. They’re due in part to the conceptual nature of the topic, but most of the confusion can be attributed to the sheer size of the customer experience umbrella.

For example, take Colin Shaw‘s definition,

A Customer Experience is an interaction between an organization and a customer as perceived through a customer’s conscious and subconscious mind. It is a blend of an organization’s rational performance, the senses stimulated and emotions evoked and intuitively measured against customer expectations across all moments of contact.

It’s a good definition; it encompasses a lot (all moments of contact) and takes into account what I’ve deemed to be the three fundamentals of customer experience:

  1. Perception
  2. Expectations
  3. Performance

With that said, it’s still a lot to cover, especially if you’re in charge of managing it.

Luckily, this post isn’t about the definition of customer experience. It’s not about why you need it or where it happens. It’s not about what it is or when it occurs. This post is about:

How do you manage customer experience?

The three fundamental components of customer experience are the foundation for my answer. If you can understand and manage perception, expectations, and performance, then you’ll be well on your way to managing customer experience.

Perception

I wrote a post earlier this month about The Perception Baseline, where I underscored the impact that momentum and perception have on customer experience. At the end of the post, I asked an open-ended question,

If customer experience is all about perception, then what should we really be managing?

That question struck a chord with a few customer experience experts and eventually started the internal dialogue for this post.

There are two questions I considered, and the answer to both was the same:

Perception is crucial, but perception of what?

What is the number one thing customers want?

The answer: VALUE!

Every customer wants to believe their money is well spent. Whether it’s an $8 lunch or an $80,000 car, we all want value from our purchases. Companies that provide great value are also known for great customer experience. Why? Because their customers believe they’re spending wisely and receiving a benefit from their investment. Money is only one aspect of perceived value though. Customers also invest their precious time, emotion, and reputation in their interactions with you.

The primary metric for customer experience is the perceived value of a customer’s monetary and intangible investments.

Before we dive in further, it’s important to understand that the customer is interpreting the experience in order to give it meaning. Future interactions (with the company or with peers discussing the company) will be steered by their understanding of the experience. Their perceived value will be influenced by many things, some of which are in our control and some of which are not.

The root issue then becomes how we optimize the customer’s perception by managing the things we are in control of. I believe that the other two fundamentals, expectations and performance, are the key to managing this perceived value.

Expectations

Meeting or exceeding expectations is crucial to any customer experience. That doesn’t mean we should under-promise and over-deliver. It means our messages should be authentic. We should be delivering messages that clearly reflect our capabilities and intentions. Hyping a product or service for more than its worth may get you more initial business, but it will degrade your reputation, lead to fewer repeat sales, and kill your referral engine. In his book, Rework, Jason Fried calls this being in media good versus at home good. In other words, the expectations we set up front will largely determine the long-term value of the purchase.

In Newton’s Law of Authenticity, I argued that the authenticity of our messages largely affects customers’ reactions. In fact, the messages we convey to our customers are the largest part of setting expectations. This is as true in mass-media advertising as it is in one-to-one customer support. We’re always sending messages, and the authenticity of those messages is what sets our customers’ expectations for future interactions.

While the authenticity of our messages and the resulting expectations are extremely important, they will always be measured against our performance and ability to deliver on them.

Performance

The ability to deliver on promises is paramount to customer experience. The performance of a company is one thing that can quickly set it apart from its competitors. However, the problem for most companies isn’t the ability to perform; it’s focusing on what aspects of the business they should be performing well in.

One thing I notice in most customer experience definitions (including Colin’s) is a phrase similar to:

…all points of contact…

I agree that each point of contact will have an effect on the experience, but that doesn’t mean you should try to perform heroically in all of them. It’d be nice if you could, but in the real world of business that’s rarely the case. In fact, I’d go so far to say that it’s never the case.

You should focus your energy on the core aspects of your business.

Customers will measure you based on how you perform in your core business. A software company should create great software. A trendy clothing company should sell the latest fashions. A TV network should produce entertaining shows. Each company has a core business. To meet and exceed the expectations you’ve set with your customers, perform especially well in your core business and provide exceptional service along the way.

Manage Customer Experience as Value

Customers are influenced by the perceived value of their investments in time, money, emotion, and reputation. The return on those investments shapes their customer experience throughout the various interactions they have with your company.

To manage the value you provide and the customer experience you desire, you can refer back to the three fundamentals:

Perception

Be aware and conscientious of the different facets of value: time, money, emotion, and reputation. Your customers will be measuring (both consciously and subconsciously as Colin tells us) the return you provide on them in every interaction.

Expectations

Be authentic in your messages. Communicate clearly and truthfully about your intentions and capabilities. This paves the way for setting clear and attainable expectations.

Performance

Concentrate on the core aspects of your business. Your performance, measured against the expectations you have set, is the foundation for the value you provide. Focus on the things you can control, and perform exceptionally well at the things your business thrives on.

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9 Comments


  1. I was thinking a lot about perception the other night while out to dinner with several people. The place in my perception (check my twitter feed) was great and offered great service. A few others disagreed and offered up their own reasons which I still think were off base. I guess it goes back to the old standard that you can't please everyone. My biggest criticism of the poor rating my friends were giving is based on the fact that they were judging the place on a standard of perceived service that the establishment was not really after. No matter what they had done, they would never have live up to the given scale by which they were being judged. Looking at their Twitter feed as well as Yelp reviews, I think they were hitting their mark for people who understood what the place was offering. And in that, they were succeeding.

  2. Excellent post, Tim, thanks!

    I have a quick question on the three fundamentals: Isn't our perception just our interpretation of an organization's performance with regard to (meeting or exceeding) our expectations?

    In other words, isn't perception largely determined by the alignment of performance and expectations? If so, shouldn't we primarily focus on setting honest expectations and meeting and/or exceeding them? A few (well, many) uncontrollable variables aside, one could argue that by focussing on these two fundamentals, we would already be managing the customer perception (and hence also the customer experience).

  3. “Isn't our perception just our interpretation of an organization's performance with regard to (meeting or exceeding) our expectations?”

    Yes, exactly what I was trying to point out. You are spot on with all of your comments. I should have made my points clearer.

    To summarize my opinion:

    1. Messages (marketing, sales, advertising, any communications with a customer) create expectations. Authenticity is key.

    2. Expectations create a metric for our customers. Our performance is measured against that metric.

    3. The expectation-to-performance variance (good or bad) creates a perception of the experience.

    4. The perception is largely based on value. Value of money, time, emotion, and reputation that has been invested with the brand.

    When asking customers about customer experience (e.g. “How would you rate your customer experience with Brand X?”) their response is going to be based upon the perceived value of their tangible and intangible investments.

    So yes, exactly as you said, focus on expectations and performance to manage perception and thus customer experience. It sounds so simple!

  4. I think that as long as a company is setting an expectation that customers are willing to invest in, then you're exactly right. Not everyone has to be like Ritz or Zappos. Sometimes the value you get out of something lesser is perfectly acceptable…maybe even desired.

  5. Tim,

    Another post that really resonated with me related to what I'm working on – at the end of the day it is about creating value for our clients and value for the firm. As I thought about it, one angle that's probably Step 0 as organizations consider how they manage perceptions, expectations, and performance is also getting clear on which customers they want to deliver value to. It most struck me as I read your Performance section. As the saying goes, we can't be all things to all people. In order to focus on the core aspects of our business we need to also focus on the customers that are core to our business and what matters most to them.

    To me, the intersection of “core aspects of our business” and “core customers” is where getting all three fundamentals right is most important – and essential in order to deliver value on a consistent basis.

  6. I agree with everything you mentioned however, I think it's also worth acknowledging that some expectations are outside of an organization's direct control. Once customers start taking a message and sharing it, expectations are created without the organizations control.

    Restaurants are a great example of this. There is a restaurant that I regularly proclaim as the best pizza in town but that creates high expectations. Since tastes are so subjective, they would never try to create the same expectation because it's so hard to live up to.

  7. Good point James, but wouldn't that a great problem to have? Customers running around exclaiming how wonderful you are, getting all of their friends to come try you out…that sounds pretty good to me. I suppose that's where performance really comes into play…you don't necessarily know if you're serving a loyal customer or a first time skeptic. If we treat everyone like they need to be wowed, then we've started down a good path.

  8. Great comment Aimee. We have to know who we're selling to before we can deliver our authentic messages. It's much easier to perform when we know the type of customer we're performing for.

  9. perceived value is not additive. In other words, some things like air plane seat belts are necessary to manage operational risks.

    Likewise, some operational best practices are necessary no matter what the customers perception is. The key then is to show more of a macro look to ways subjective perception and through authentic messages to help customers be more objective when through due dilligence and aligning that perceived value with expected and actual performance

    perceived/expected= perceived/actual X actual/expected

    financial communication design

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