Profitability & Customer Experience

I did some research over the past 12 month correlating customer experience and profitability.
The result in a nutshell:

1) You won’t find a company with a great customer experience that is not profitable
2) You may find profitable companies with a mediocre CM
3) You will find that all companies with a below average customer experience have no track record of profitability over a longer time period.

Take Cisco, Salesforce.com, Star Bucks, IBM, Apple, WholeFoods, Zappos, Virgin… You find the correlation of a great customer experience, corporate culture and profitability across all industries, technologies, B2B, B2C, producing companies, service organizations or reselling businesses.

I tried to understand the motives, processes, influence factors and desire to change a certain situation within an organization towards a better customer experience:

1) Organization
Investor driven organizations or engineering driven organizations have the cultural focus either on the shareholder value side of the world or on the technology side of the world. Business driven companies have the cultural focus more on the customer or market side of the world.

2) Decision or Reward
Customer experience development doesn’t seem to be something you can “decide” to do. Almost like you can’t “decide” to have a certain hobby, a favor for something etc. While the correlation with profitability seems obvious, profitability seems not to be the key motivator for leaders to create a better customer experience. But profitability is actually the reward for the cultural engagement in customer experience.

3) Finger Pointing
I used several online groups and communities asking if people can give me examples what they did to create a great customer experience and what the outcome was. Out of about 50+ discussions I couldn’t get a single answer. But I received approximately 1,000+ comments on what people need to do to create a better customer experience. NOW – since we are all a customer of somebody else – every day, several times a day, why is it that only “the other should…”?

4) Customer Voice
During several conversations I tried to explore if people see a correlation between the rise of social media and the rapid growth of customers expressing their excitement or frustration. The response was primarily: “You won’t find our customers in social media”, “We see a few but this is just a fraction of our customer base”, “What can you do about it”, or “I have no time for that”. After some exploration and sampling a customer list, we found over 50% having a profile on any of the sites and most of the actual consumer of the product or service are present in the social web. The dilemma we discovered that typically “the customer” is the so called “economic buyer” or “decision maker” – however the “influencer” is the user or consumer of the product we produce but we no longer even call them “customer”.

5) Evidence is not enough
Discussions with investor driven organizations showed another interesting behavior: “Can you give me more evidence that there is a correlation between customer experience and profitability”. I was asking what they would do if they get hard evidence for the correlation: “We will bring it up in the next board meeting”. Like we know by now that the best products are rarely market leaders – we may recognize that finance driven organizations are similar to engineering driven organizations that have a specific logic that I don;t want to argue with but more often that not don’t resonate with the broader market.

6) Customer Experience is a choice
I was wondering if companies with a bad customer experience will risk going out of business. While almost all I asked that question said – “Yes over time they will”, “I’m sure”, or “With all the transparency we have today it is inevitable” –  I’m not so sure. The counterbalance to a bad customer experience is CHEAP. We all have choices, yet many chose cheaper product, cheaper service over well known better customer experience. Millions get outraged over video clips showing how bad United Airline treats their customers and can write endless posts about it, maybe even write a story about it during a flight from Chicago to Houston – flying what: United – because it’s cheap. We can argue about this or that rental car service, grocery store, computer builder, car manufacturer… still you may buy it because it is so cheap. However even super cheap stuff maybe part of the equation and even has a great customer experience. I personally find Cosco the cheapest grocery store with the best product quality and much better trained personnel than most super markets. I guess it is fair to say: you can survive with a mediocre customer experience but you will a) never lead and b) be replaced by virtually anybody who does a better job for the same price.

7) Customer Experience Management
I followed many conversations about what companies need to do to “design” a better customer experience. It spanned the whole area from business processes, team training, better product, better service… I saw elaborate process models, frame works and methodologies. I saw the top 10 tips to create a better customer experience and customer experience trainings. CEM seems to be about processes and work flow. WHY? Because that is how consultants, trainer and coaches can make money. And while I trust that many CEM consultants really want to do a good job and help those companies move from a mediocre CE to a great CE, I have yet to see a consultant who can say: “Here is where my client was 5 years ago and today they are here”.

8) Customer Experience As A Culture
A company’s culture is typically driven by a smaller group of people attracting a bigger group of people that match their way of thinking, their way of doing business and their way of dealing with others. The company culture (no matter what it is) will match a certain part of a market. The better that match – the more we will talk about a customer experience. Apple has only 5% market share, yet they almost perfectly match the culture of their customers – hence an outstanding customer experience. WholeFoods is expensive and has just a small market share, yet again matching the needs of their customers that lead to the well known positive customer experience. My very personal opinion after all: The Customer Experience is a 1:1 reflection of the company’s culture, not a process.

My conclusion:
The correlation between Customer Experience and profitability is:
Profitability as a motive would still not get a company a better customer experience, regardless what the organization tries to institute.
Customer Experience as a motive however would provide profitability as a result.

So what can you do for a better customer experience on an ongoing basis?
1) Make sure that the customer experience is always part of your overarching corporate objective
2) Routinely discuss with your customer AND your team what you should do to do a better job
3) Let your customer differentiate between nice to haves and gotta does
4) Purchase once in a while from your own company – you know you can return it ;-)
5) Reward your team for what your customers say about you
(you noticed it’s not a project but an ongoing activity)

If any of this is not possible – ctrl-alt-del

In one of my previous companies I had a little poster for every job candidate who was interviewing:
Your real boss in this company is the customer – he is the only one ever paying for the bills, because I don’t.
Think of it when you sell, build a new product, solve a problem, return a product, write an invoice, or anything else you ever do. We can’t “create” shareholder value but paying customers do.

Axel
http://xeesm.com/AxelS


  1. BobBob03-10-2010

    Excellent article. I think you are right on. I love your examples of Apple and Whole Foods. I think Charles Schwab gets it and provides a great Customer Experience.

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