Customer Experience in the Digital Age

Bernd Schmitt: Starbucks. Most folks have been to a Starbucks and therefore had a personal experience with that brand. Starbucks created an entirely new coffee experience in the late 1980s and 1990s. And it's continuing to be an innovative company today. I have featured Starbucks in my books on experience. They've faced a lot of competitive challenges over the years. The latest is the cultural movement that you could call the “hipster coffee movement.” In response,  one of their latest innovations is Starbucks Reserve. They're not just serving coffee; they're creating an entire experience about coffee making that also includes all sorts of merchandise. In addition to coffee, you can get signature cocktails, wine, and beer. They also serve food from Princi Bakery that includes pizza, polenta fries, and pastries. They're reaching out and expanding the customer experience. Starbucks is a great brand and a classic example of customer experience that we can learn a lot from.

Markus Giesler: I go with a smart home company called ecobee, recently acquired by Generac. They are the number two leader in smart home thermostats, a very complicated category that is dominated by Google, and a company that didn't have a big budget to make itself known. So, their case was one of low brand awareness and a complicated product. They found a way to shift from a capabilities based approach to an experience based approach and did this on a relatively small budget of no more than $300,000. Their customer experience design was one that enables planet positive action. So, ecobee thermostats aren’t merely about warming your home. They’re really more about saving our planet. I find that a pretty remarkable pivot. Due to its radical embrace of CX orientation, ecobee had seen 15 times growth in sales last year. It has pushed away Honeywell and it competes successfully against Google.

Bernd Schmitt: A great customer experience has three things in common.  Number one, customer centricity. Really understanding what customers want and what they want today. The example that Markus gave is about customers’ environmental concerns. Companies need to capitalize on such new trends and understand customers deep down. That is the idea of customer centricity. Another key mandate is to have a CX strategy, a customer experience strategy. That means you need to plan strategically what the experience should be and how you are going to deliver an experience that you want your customers to have. The third component is creating an integrated experience, that is designing and implementing the strategy in an integrated fashion at every touch point. Those are the three key tasks – customer centricity, having a specific CX strategy, and then integrating it in a powerful, consistent way.

Bernd Schmitt: We’ve heard from so many customers who feel that, in general, their customer experience seems to be getting worse, especially when it comes to hotels, airlines, and retail. What these three industries and others have in common is that they are having trouble finding employees and keeping them, especially after COVID-19. But one needs to train people so that they pay attention to the customer and customer needs. There needs to be a clear understanding of how to interact with customers at every touch point to get that integrated experience. So, what can a company do when it can’t find the right people?  One approach might be to have technology that provides some of the services that people used to handle in hotels, airlines, and retail. We are currently seeing more integration of digital services in hotels. For example, when you go to a hotel today you no longer have to pick up the phone and call to request housekeeping, or the front desk, or the concierge. Instead you can communicate with someone, or an AI,  digitally through WhatsApp, WeChat, or the hotel’s own app. That is one new approach. There can be an even more radical approach which is to take people out of the equation. In Asia and several other countries, you encounter more and more service robots in hotels. They are doing the service delivery instead of people. This was implemented during COVID-19 when we did not want to have face-to-face interactions. There are a lot of innovative digital solutions coming to address these customer experience problems.

Markus Giesler: Here’s an interesting observation, the companies that have a lack of customer experience quality or where customer experience is going down are often data-driven companies. Data is very much the central focus of a lot of companies, including retail, transportation, travel, hospitality, insurance and financial. Now think about the relationship between data and experience. There is a synergistic relationship between the two if you do it well and a parasitic relationship between them if you don't. Data is something companies take. They need that in order to succeed in today's marketplace. But, they also need to give something in exchange. And what they give in exchange, ideally, is an experience. The experience is hopefully greater than the sum of its parts. It's what makes customers want to come back. It's what keeps consumers engaged. If your experience is really top-notch, then data is given by consumers. We can think of data and experience as two sides of the same coin. Many companies find it difficult to think about experience design in terms of that symmetry because they're either too hung up on data or they're too hung up on experience. One goal that I see in my work with companies and my students is to bring these two worlds together so that data is taken and experience is given. That transaction needs to be a balanced one and I think companies find that hard to do. It’s really and an art and a science to balance that out effectively.

Bernd Schmitt: There are numerous measures for CX. What is most important depends on which aspect of the customer experience you want to measure. There are specific, very tangible measures the user interface, the user experience. With respect to the features a particular product has, for example, you have to test how people are interacting with that product. I've worked with companies in the smartphone business. They are doing such testing on an ongoing basis. And not just the features but also how the phone feels in your hands and all the interactive components that you nowadays have in the phones. That would be the user experience. If you're talking about online, digital, or social media experience, there are different measures. There’s the net promoter score, word of mouth, and social influence.

Let’s take a look at broader measures. Ultimately, the success of your experience project depends on whether customers are satisfied. Customer satisfaction, or what is nowadays called customer delight, is a key outcome measure. Customer delight goes way beyond just being satisfied, meaning confirming your customers’ expectations. It's about creating surprise elements. You want to ask, for example, to what degree do we surprise you? To what degree do we delight you whenever we are interacting with you? And do so for every touchpoint with the customer. Another outcome that we want from any CX project is repeat purchase and loyalty. Are your customers coming back on an ongoing basis? That’s important tracking that needs to be done. Finally, with respect to the brand, is the brand truly loved? Are people attached to that particular brand? These are the various general measures that need to be linked as part of a broad-based measuring system where you look at the individual components of the experience and the ultimate outcomes with respect to customer satisfaction or customer delight, repeat purchase and loyalty, and brand attachment. Data are so important to measurement. When we are designing these measurements, we also need to use the latest digital technologies. For any measure that I just mentioned, just go to ChatGPT. It will tell you what these things mean. It will tell you what the ideal measures are. You might even collect data through it. You can analyze your measurements through their advanced analysis tool. Data are becoming easier and easier to collect. Once you have your measurements, then you can link them to your CX strategies and objectives and use them as key performance indicators.

Markus Giesler: I believe that it is possible to be too fixated on tech. A lot of people are excited about ChatGPT right now. It’s as amazing and magical as tech gets. One of the most effective ways to really measure the quality of an experience is to ask people, very simply, how does this make you feel. Analyzing emotions, analyzing sentiments, that is something that we are in a position to do very effectively and very easily through the data we generate through customer touch points and interactions. Technologies such as Chat GPT, in my opinion, are less about the brilliance of an algorithm and more about how a technology can make us feel. This is one of the important KPIs that companies are increasingly paying attention to.

Markus Giesler: A lot of companies are very excited about AI right now. They're approaching it predominantly through a capabilities-based lens. AI has certain capabilities that are great like forecasting, listening, predicting, interacting, and producing values. But if we leave this kind of interest in the hands of software engineers and programmers too much, capabilities are merely an endpoint. However, I look at them as raw ingredients for power experiences. We did some research with a few colleagues on the consumer experience of artificial intelligence and what we found is that it has surprisingly little to do with AI’s actual capabilities and more to do with how each capability translates into an experience. For example, listening translates into feelings of being understood or misunderstood. That is a tension that we, as marketers, have to design around. Sometimes algorithms misunderstand us and that can lead to problems. The step from AI capabilities to experience is an important one. It's not an easy one and there's a lot of skill that goes into translating a capability into an experience. Overall, experiences are greater than the sum of their parts. There are four different experiences that we found and that’s something we dive deeper into in our program.

Bernd Schmitt: There's not so much of a difference in the strategy that you need and in the customer centricity. The customers B2B are not individual consumers but are other companies. You need to understand how they run their business and how you can add value to their business. In terms of strategy, there may be different strategy components. The biggest difference is really in the implementation. It's in the touch points. For B2B, you go to trade shows or you have online meetings about your business. Those are key touchpoints. Then, ultimately, the delivery of the product or service and how the customer first interacts with it. The framework, the thinking, the mindset that Marcus was talking about is relevant for both B2C as well as B2B.

Markus Giesler: Having worked with a lot of B2B companies and B2C companies, I want to add two really important things. Number one, there's always a consumer somewhere. Secondly, in the context of B2B, the capabilities are very often your experience. It's a direct translation. You're dealing with domain experts. You're dealing with a competitive landscape that is shaped around capability experiences, as we call them. That’s an important difference. But, I also agree with Bernd that, in the end, it's probably a very similar design exercise.

Bernd Schmitt: In a digital or online experience, you’re missing some of the haptic and sensory components that you may have in a physical selling space. However, there is hope. I mentioned Apple Vision Pro. If that becomes a reality, there may be very easy ways to envision the product in a digital setting. When you're looking at companies that started out purely digitally, nowadays they often need a retail space. Warby Parker is the classic example and there are numerous others. You need a strong digital presence that also is experiential in nature when you have a physical selling space. It’s really about bringing the two together and creating integration that is a key component of experience design.

Bernd Schmitt: I've actually done a lot of research on robots. There's a popular theory that we have in academia that's also been picked up by journalists called the uncanny valley. That’s the idea that when a robot, like a Chatbot or an embodied AI, gets too close to looking and acting human that could actually backfire. People feel eerie or freaked out. In academic research there's empirical evidence about the uncanny valley. There also seems to be, interestingly enough, cross-cultural differences. In Asia, it is more accepted. There you find humanoid robots that look extremely human-like. Whereas in the US and Western world, consumers do not seem to like that approach. As researchers, we continuously learn more and more. Also, as people become more familiar with AI systems in general and embodied AI, we may get a level of familiarity where people may be more accepting of what they're currently resisting.

Markus Giesler: As Bernd mentioned, there is a great deal of innovation and a great deal of learning. Customer experience design is a way in which to make consumers learn how to properly interact with nonhuman technology such as an AI Chatbot. We're currently part of a large scale learning process. Companies that will competitively succeed are those that understand that CX is a way to make consumers learn how to interact with these technologies differently from what it means to interact with humans.