The Customer Experience Economy is the most violent economy in the history of capitalism.
It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages. – Henry Ford
Written by Mary Drumond and Worthix CEO, Guilherme Cerqueira
In ten years, Tesla reached a higher valuation than its 114-year-old predecessor, Ford Motors. On the other hand, over the past couple of years, former giants have come crashing down, joining Nokia, Kodak, and Blockbuster as obsolete.
Here’s the most recent list of beloved brands who have recently filed for bankruptcy or liquidation:
- Toys R Us
- Nine West
- Sports Authority
- American Apparel
- I Heart Media
- BCBGMax Azaria
- Radio Shack
Nobody is safe in the Customer Experience Economy. Decision makers at companies of all sizes are apprehensive, as they well should be. Their sky-rises, countless locations and Ivy League graduates are no longer enough to guarantee longevity.
The High Price of Commoditization
Today, corporations all have access to the same brains, same capital, and same technology.
From brick and mortar to click and order; airline companies, banks, insurances, credit cards, hotels, retailers, and almost every other industry on the planet is suffering from commoditization.
In the very recent past, technological innovation could buy 50+ years of survival and solid market leadership. But in the present, even though innovation is still crucial, most innovations don’t last more than the length of a show season before hundreds of competitors begin offering the same goods or services for a better price.
To make it worse, mobile technology and the internet have empowered consumers to a degree where they are now more informed about market offerings than the very companies trying to sell to them.
Changing their minds or switching providers is now as easy as clicking a button. The combination of commoditization and the empowered customer is taking the fight to acquire and retain customers down the worst path: price wars.
Don’t Walk Into The “Best Practices” Trap
Unfortunately, the desperate reaction of most executives struggling to keep their jobs and businesses alive is to attempt to follow “best practices”.
Most retailers are trying to be Amazon by adopting its best practices, and everyone else is trying to be ‘the Netflix’ of their own market by mirroring their strategies.
However, best practices and customer behavior can change so fast that by the time an executive adopts a strategy that worked for another company, it may no longer be relevant, and it can fail miserably.
Casualties of the CX Cross-fire
In the current customer experience economy, your direct competitors are no longer your only threat.
For every new disruption, new expectations are created. These aren’t limited to the disrupted industry, but rather every other industry that serves the lives of consumers.
- Amazon decided to deliver same-day purchases. Freight companies then started paying the price of a new customer expectations, feeling forced to cut their delivery times.
- Netflix started allowing you to select and watch your favorite movies wherever you are, whenever you want. Airlines were suddenly required to deliver a similar movie experience.
- Banks gave you mobile access to your account. Phone carriers and health insurance felt the pressure of having to do the same.
Everything Starts With Customers’ Needs
A lot of times people don’t know what they want until you show it to them.
This statement has been re-quoted several times, yet many people misinterpret it. Some believe Jobs was building Apple’s product based on his gut and intuition, disregarding customers’ needs when it’s actually the complete opposite.
While the entire computer industry was still living in the Product Economy, piling on endless features, Jobs was already living in the CX Economy with an absolute focus on users’ needs.
Let’s analyze the market conditions when the iPhone launched. In 2007, Nokia had more than 50% of market share and the N95 cell phone was far superior to the first iPhone, when comparing the list of features.
Jobs knew he didn’t have to compete with Nokia’s list of features; he had to create a product that would make people’s lives easier. Jobs created a product with customer experience as the ultimate goal.
Ten years ago, if I’d handed my Nokia to a friend, they wouldn’t have been able to tell the difference between their phone and mine. Today, if I handed my iPhone to a friend, they would be lost because my phone is directly personalized for my lifestyle and my daily needs.
Customer Centric Mindset VS. Product Centric Mindset
Unlike the old Nokia phones that were function oriented, the iPhone and the Apple iOS were both designed to deliver a personalized customer experience.
Although the Nokia possessed all of the standard phone features like camera, maps, and internet search, these same features on the personalized devices were designed to do much more. They connect people, suggest activities and venues, capture and share unique moments, and offer an amazing range of applications to support their daily challenges. Users’ needs and desires are always top-of-mind.
All players had access to the same resources, but Nokia lacked the customer-centric mindset.
Amazon and Apple are not Immune to the Violence of the Customer Experience Economy
Although Amazon and Apple are great examples of customer centricity, they are far from being on safe ground. If they don’t keep up with the speed of change to meet their customers’ needs by adapting their CX strategies and tools, they could very well end up like many of their predecessors. The first company to recognize and address customers’ future needs will be the next market leader, and this could happen at any time.
Great NPS® and CSAT Scores? Don’t Get Comfy
If you deliver a great user experience and offer outstanding customer service, this could result in high customer satisfaction rates; however, if your customers’ needs aren’t central to your business, you’re at risk of losing them anyway because they may eventually seek a more “worth it” alternative.
Blockbuster is a good example of this concept. They had great in-store experience, customer service was helpful, and customer satisfaction scores were high in most stores, but the home movie industry was disrupted by a newcomer; Netflix came into the scene introducing a new model, causing customers’ expectations to shift.
Leaving the house for an in-store experience was suddenly viewed as an inconvenience. Those infamous late fees became a thing of the past and eventually, all the satisfaction in the world couldn’t keep Blockbuster’s customers from jumping ship.
Sadly, Blockbuster’s mindset never changed, and they remained product driven (e.g. increasing the number of rental transactions per store). They lacked foresight and ultimately failed to adjust to the customers’ new expectations. We all know how that story ended. The death of Blockbuster could have been avoided, but they were focused on the wrong thing.
On the other hand, Netflix never wavered from being customer-centric and went on to innovate further with their streaming offer. The mindset was on the customer experience from its inception.
This is a warning for companies to not get comfortable when registering high Net Promoter Scores or Customer Satisfaction results. More important than having satisfied customers is striving to be the most “worth it” alternative on the market.
It’s Not Your Competitor, It’s You
Everything starts with your customers’ needs. The other day I saw a post that read:
Companies are not being killed by their competitors, they’re losing their customers to their own outdated value proposition.
It’s the violence of the customer experience economy proving that organizations must continuously strive to create experiences that their customers believe are “worth it”.
A CX Wake Up Call
If people inside organizations keep working for their products, aiming to please their bosses instead of working for their customers, companies will fail, and it will be both fast and painful!
This post is an updated version of an original posting from October, 2017
Net Promoter Score and NPS® are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.