All of us are customers, and as such, we all have buying experiences (good and bad) that shape our opinion of the company from which we are buying. There have been numerous discussions on how the exchange between buyers and sellers has evolved from creating products, to building customer relationships, to creating compelling customer experiences. This idea reflects the notions that how customers experience the process of acquiring and using a product/service and the exchanges along the way matters. More and more companies realize that they are competing on the basis of customer experience. In fact, recent research suggests that customer experience is a better predictor of loyalty and word of mouth than any other measure. So what is customer experience and how do we measure it?
Measuring and improving customer experience is difficult in part because there isn’t a widely agreed upon definition of what constitutes a customer experience. This lack of definition also creates the potential issue of customer experience devolving into everything. But there has been some great progress on the definition and measurement front.
Before we discuss some ways to measure customer experience, let’s step back and review the thinking to date. With the focus on customer retention in the early 1990s, Frederic Reichheld and others began to research customer loyalty and the association between loyalty and profit. It is from this research and others that many organizations adopted the “zero-defect” service philosophy as a way to reduce customer defection. Customer satisfaction emerged as a key measure. Research suggested a strong relationship between satisfaction, recommendation, and business outcomes such as repeat purchase. Two key tools emerged to measure these concepts: SERVQUAL and the Net Promoter Score (NPS). Using five dimensions, (reliability, assurance, tangibility, empathy and responsiveness) SERVQUAL became a way for companies to benchmark their service quality. A key concept behind SERVQUAL is to assess the gap between expectation and service received. Current thinking suggests that experience is more about how customers assess the value received in relation to their expected outcome of the interaction. SERVQUAL may be a good tool for measuring the expectation gaps but it isn’t necessarily the best tool for measuring and managing customer experience. Why is this? A service encounter may be judged as “good” or “meeting expectations” but that doesn’t necessarily mean that the customer achieved their desired outcomes. The SERVQUAL tool doesn’t examine the experience before or after the service encounter.
Shortly after SERVQUAL, came the Net Promoter Score, which Reichheld and others claim is the sole metric a company needs to understand its effectiveness from the customers’ perceptive. A tremendous amount has been written about NPS and many companies trust and leverage this score to their advantage. But, it is not a measure of experience or the quality of experience. In 2011, Dr. Philipp Klaus and others began to explore alternative ways to measure customer experience that would be based on the cognitive and emotional assessment of value from the customers’ perspective and that captures how well the organization performed on its ability to deliver value customers’ received. They looked at four primary dimensions associated with customer experience quality:
- Product experience (perception of choices and comparative offers)
- Outcome focus (ability to achieve their desired outcome)
- Moments of truth (service expectations and encounters)
- Peace of mind (confidence in the service provide and perceived expertise of the provider).
By using these 4 dimensions to evaluate customer experience quality, Dr. Phillip Klaus came up with 4 conclusions:
- Peace of mind has the strongest impact on customer satisfaction, loyalty and word of mouth.
- Moments of truth are the next most important attributes to positively impact loyalty and word of mouth.
- Outcome focus (the customers’ ability to achieve their goals) effects loyalty and word of mouth but only to a lesser extent than peace of mind.
- After peace of mind, product experience has the strongest impact on customer satisfaction, but not as much impact as the other three dimensions on loyalty or word of mouth.
This research offers a different view into how to define and measure customer experience. If you plan to create a measure of customer experience, consider how your organization is set up to deliver on these attributes and how you would measure each of these dimensions.