The Frowns that Ruin Businesses

As our understanding of consumers has grown, so has the definition of the customer experience (CX). The fact is that with the growth of technology and social media, the way consumers interact with brands has become more immersive. Until recently, CX meant a singular focus on customer service, now it entails all the possible interactions a consumer has with a company ranging from viewing advertisements to visiting stores to using a product or service. According to a Salesforce study, for 80% of customers the experience a company provides is just as important as their products and services.

Companies that have gotten ahead of the CX curve are seeing financial rewards as well. According to Forrester, ‘experience driven businesses’ (entities that invest in CX and embrace best practices) tend to have a 15% annual revenue growth rate compared to 11% for other companies. Data from the American Consumer Satisfaction Index reinforces this: a portfolio of companies with high and/or improving scores on their satisfaction index produced higher stock returns, peaking to five times the value of S&P 500 in December 2016.

Clearly, CX has moved from being a competitive differentiator to becoming a business imperative. A study by Acquia (an open source digital experience company) has found that marketers are overwhelmingly confident about their CX practices; 87% believe they are delivering on consumer expectations. Yet, consumers polled in the same study felt differently, with over half reporting that the brands they engage with do not meet their expectations in terms of a good experience. Furthermore, two out of three could not remember the last time a brand exceeded their expectations. So, why are marketers and consumers on different wavelengths?

The Service Quality Model or SERVQUAL (a multiple item scale to measure consumer perceptions of service quality) is a diagnostic tool that gauges this disconnect between consumer expectation and brand delivery by focusing on five gaps.

1 Knowledge Gap

This is an inherent misunderstanding by a company about what their customers want due to a lack of research or interaction between the product stakeholders and the actual market (Pakistani start-ups often fall prey to this gap). This gap can also arise due to misleading data – the sweeter ‘New Coke’ was launched by misinterpreting the results of taste tests, and the product was discontinued less than three months after launching.

2 Policy Gap

Even if companies know their customers, this knowledge may not translate into proper standards. For example, when a customer places an order at a food outlet in order to benefit from a credit/debit card discount deal and the rider does not bring along the payment terminal for the card. The set standard would be to ensure that riders always carry the payment terminal regardless of any discounts.

3 Delivery Gap

For example, a bank which despite having well-trained staff and automated queuing systems may require customers to wait because the network is malfunctioning despite quality specifications.

4 Communication Gap

This occurs when there is a gap between the delivery and the promise communicated in the advertising. For example, local telecom operators have heavily advertised their 4G data speeds. Yet, only few have delivered on the experience. Speed alone has limited impact on mobile data satisfaction (according to the Boston Consultancy Group, customers cannot distinguish the difference in video performance after crossing the 1.5 Mbps threshold) and in fact, consistency is more critical for satisfaction (no buffering and smooth browsing). As a result, factors like spectrum configuration and 4G coverage are equally important. Jazz and Zong dominated OpenSignal’s Mobile Experience for data related attributes in February 2020 and now account for 66% of mobile data subscribers in Pakistan.

5 Customer Gap

This is the overall difference between customer expectations and perceptions. This depends on the consumption goals of the customer given that perceptions are created by interactions with the brand. Delivering on baseline expectations means providing a ‘utilitarian experience’, whereas going beyond this and actually delighting customers is creating a ‘hedonic experience’. The policy and delivery gaps will inevitably be more comprehensive for entities that promise hedonistic experiences. For example, in a fine dining restaurant, the ambience and wait-staff service will be just as important as the quality of the food, whereas a roadside eatery may get away with poor service if the food is good. (It is important to note that only when hygiene factors deliver can one begin to focus on delighting a customer.)

Similarly, expectations change depending on whether the service is irregular (staying at a hotel) or a long-term commitment (using a cellular connection). Entities engaged in continuous relationships need to focus on their core servicing factors. For example, a customer may not switch from their current bank, even if the competition is offering better services – why bother getting into the cumbersome process of opening and closing accounts if your current bank meets your expectations. This is called ‘customer inertia’ and companies can leverage this to keep consumers engaged even if they are not wholly satisfied.

Brands can charge more for providing a ‘delightful experience’. According to a PwC report, customers are ready to pay a premium in exchange for great experiences (ranging from 16% for a coffee to seven percent for a winter coat). However, delivering below expectations has a bigger impact compared to exceeding expectations due to ‘loss aversion’ – people prefer to avoid losses rather than acquire equivalent gains (it is better not to lose five dollars rather than find five dollars). According to PwC, one third of customers stop doing business with a brand after just one bad experience (this jumps to a half after several bad experiences). Furthermore, multiple studies point out that over 90% of unhappy customers leave without bothering to complain about what made them unhappy.

Understanding the gaps in CX, based on brand positioning and promises, allows companies to use the appropriate metrics at the right stage of a customer journey. CX measurement encompasses a wide variety of performance indicators which can be broadly divided into transaction-based evaluations that focus on specific touch-points and relationship-based evaluations that describe the overall association between customers and brands. CX metrics allow companies to benchmark their performance against the market and the competition; a robust and effective measurement programme will enable them to understand what parts of the customer journey are working and where improvement is required.

CX has been under focus for quite some time; Dell’s CIO Jerry Gregoire famously predicted that customer experience would be the next competitive battleground, all the way back in 1999. According to Forrester, experience driven businesses have a 1.6 times higher customer satisfaction rate, a 1.9 times higher repeat purchase rate and a 1.7 times higher customer retention rate. Moreover, they also have a 1.5 times higher employee satisfaction rate. Clearly, understanding the consumer journey has never been more important because these complex and nuanced variables build the perception of an organisation – CX has become the new brand.

Ans Khurram is an insights professional working in the telecommunication industry in Pakistan. anskhurram@gmail.com