The Future of Retail Will Blow Your Mind. A bold claim? You bet.
The retail industry is facing a tectonic shift. Empowered customers are challenging age-old truths every day. New distribution channels, e-commerce impacting physical stores, new payment systems and innovative technical solutions disrupt old operating models. Mobile and wearables connect customers wherever they are. Retailers face new and unprecedented challenges.
But you know this, right? You’ve developed a digital strategy. You’re selling online. You’ve got a mobile app. Maybe some digital signage in your stores. You’re sorted.
Happy Valentine’s Day! You know the feeling of being in love: You want to stay with your significant other forever, love them more each day, and tell everyone how great they are. Your customers know it, too! Many companies have begun tracking how their customers feel as part of their CX measurement program. In the CX Index™, we too track how customers felt during their most recent interaction with a brand.
What’s Love Got To Do With It?
We find that customers who give high scores on Emotion are more likely stay with the brand, spend more on products or services, and tell others how much they love the brand. And just like in relationships, there’s a big difference once your customers fall in “love” – customers in the CX Index who rate the brand a perfect seven out of seven on Emotion, or “love” the brand, say they are 18% to 40% more likely to enrich their relationship with the brand. For brands in all industries, this means that there is business benefit to helping your customers fall in love with you (whether via greater revenue, lower churn, or both).
Let’s Talk About Love
Brands benefit from higher customer advocacy loyalty when customers love them -- but how can brands benefit if they don’t know what love is? Forrester analyzed the specific emotions felt by customers during their most recent interactions with brands in the CX Index.
● Baby, don’t hurt me. Brands whose customers score them high on Emotion almost never make customers feel negative emotions like frustrated, angry, or anxious.
We followed a rigorous, academic approach that started with the premise that improving CX drives customer loyalty. Using our Customer Experience Index (CX Index™) survey questions about customers’ loyalty to and spending with a particular brand and combining them with industry-level numerical assumptions, we answered the following question: How likely is a customer to stay with your brand, or spend more, or recommend you to others — and what would that be worth to your organization in dollars and cents?
For each customer, we calculated a loyalty-based revenue potential and a CX Index score. Calculating these numbers at the individual level allows us to track the relationship between CX and revenue throughout the entire range of CX Index scores and develop models to describe the nuances of how CX drives revenue in a particular industry. With these models, we can predict the revenue associated with a brand’s CX improving — or even deteriorating.
We tested several models to find the “shape” that best describes the data. We found that the relationship between CX and revenue potential tends to follow three main shapes:
Linear. CX and revenue move in lockstep. Whether you improve a poor experience, a mediocre experience, or a good experience, the impact on revenue will be the same.
In a previous blog, I outlined how context matters, and specifically how the industry context in which you are doing business matters to the strategic decisions you make. But there are also commonalities across industries. Some business challenges plague multiple industries such as how to improve customer experience, retain loyal customers, and improve sales whether in the retail or hospitality sector, or how to get the inputs you need to make your products and to get your products to market in a timely manner in the manufacturing or pharmaceutical sectors. And, everyone these days is increasingly concerned about fraud, risk and security.
The holidays have a way of bringing people together in more ways than one – and every holiday season I’m reminded of just how universal the power of human emotion is. Regardless of lifestyle, background, and world view, people everywhere are truly emotional beings, moved by fundamental feelings of joy and sadness, hope and fear, love and loss. And anyone who has observed frantic shoppers careening through store aisles or the unbearable anticipation of children on Christmas morning can see that, at this time of year, emotions are at their peak.
Advertisers know holiday shopper emotions better than anyone; they have perfected the art of tugging at heart strings or prompting tears to spur a purchase. But as consumers wear their hearts on their sleeve, retailers broadly must be in tune with – and responsive to – customer sentiments. For example, when passionate shoppers turn to social channels, retailers mustn’t dismiss their cheering or venting. In fact, Forrester’s Customer Experience Index (CX Index™) data shows that consumers often experience their most positive brand interactions on social media – and remember them more favorably than engagements on websites, over email, through phone conversations, and even in person:
The fact that human beings make affinity and spend decisions based in large part on emotion is not new news. It is the underlying logic of advertising – heartstrings are the early sparks of revenue. But there is a reason that most companies have not baked emotion into experience design and into the day-to-day engagement with customers. It's hard to do.
Emotions are situational, dynamic, and hard to read. Yet the gulf between the science of emotion and the business of emotion is closing, creating a set of new tools to convert great experiences into sustained growth.
Last week during an online event, I brought together thought leaders, Anjali Lai, Harley Manning, and Roxie Strohmenger, to translate the science of emotion to the pragmatic business application of emotion. If you were unable to watch it live, here is the replay – and for good measure, here are key takeaways from our discussion:
Emotion is the next step in getting to know your customer.
The customer is now the center of the universe, and to win in this market, companies need to know – really know – their customer. Beyond satisfaction, advocacy, and journeys, companies must understand what makes customers tick and how to influence affinity and spend. Emotion is not the next thing "just because"; it gets to the heart and soul of operating in a customer-led market.
We’re pleased to announce that this year’s UK Customer Experience Index report is now live! The report is based on Forrester's Customer Experience Index (CX Index™) methodology, which measures how well a brand's customer experience strengthens the loyalty of its customers.
Overall, it’s been a good year for UK brands, with the percentage of good and OK scores increasing thanks to a significant drop in poor scores. We found that:
Six of the eight industries surveyed improved their average score.
Twenty-four of the 56 brands surveyed made significant improvements in their experiences.
Video conveys emotion unlike text and can show features and functionality unlike any picture. That’s why retailers see nearly triple the conversion rate on product pages that have video versus those that don’t. Entering what Facebook CEO Mark Zuckerberg calls “this new golden age of videos online,” companies and brands need an enterprise-class online video platform to deliver the video experiences that drive customer engagement.
Your business model is under attack. And it’s not by your competitors. It’s under attack from your customers. Three years ago, Forrester identified a major shift in the market, ushering in the age of the customer. Power has shifted away from companies and towards digitally savvy, technology-empowered customers. They now decide winners and losers: Our Empowered Customer Segmentation shows that more than a third all US online adults want new and engaging digital experiences. They will switch companies to find these experiences. In this environment, being customer-obsessed can be your only competitive strategy.
In Forrester’s 2017 Prediction Reports, we are tracking firms’ progress on their customer-obsessed journeys. In our annual collection of predictions, we look at business strategy, leadership, customer experience, and technology dynamics to examine progress and predict the key events, changes, and trends that will occur in 2017.
Here are three key findings from our 16 predictions reports:
The next wave of Customer Experience will have a profound impact on firms’ P&L: The shift to a customer-led market represents an immediate and prolonged threat to company survival. Our research shows a clear correlation between the quality of customer experiences and revenue growth; it also affirms that emotion is a core driver of customer loyalty and spending. The next wave of CX will connect these dots, blending analytics, technology, and design to evoke emotions to drive affinity and directly impact revenue.