Listening to customers through a well-established voice of the customer (VOC) program is critical. However, without a customer experience strategy rooted in a company strategy, it’s easy for a firm to lose track of its core value proposition to key target customers.

Don Norman tells a wonderful story about a conversation he had with Southwest Airlines chairman Herbert Kelleher that speaks directly to my latest report on customer experience strategy:

"Use Southwest Airlines as the model. When customers demanded reserved seating, inter-line baggage transfer, and food service, they refused (and only now, are reluctantly providing semi-reserved seating). Why? It is not because they ignore their customers. On the contrary, it is because they understood that their customers had a much more critical need. Southwest realized that what the customers really wanted was low fares and on-time service, and these other things would have interfered with those goals.

 I once had a lively, entertaining dinner with Herbert Kelleher, Chairman and co-founder of Southwest Airlines. I asked him why they had ignored the requests of their customers. Herb looked me up and down sternly, sighed, took another sip of his drink, uttered a few obscenities, and patiently explained. His marketing people asked the wrong question. They should have asked, would you pay $100 more for inter-airline baggage transfers? $50 more for reserved seating? No, the customers wouldn't have. They valued on-time, low-cost flights, and that is what Southwest delivers.

What is the right customer experience strategy? My new report on customer experience strategy investigates this question. To give it some context, consider customers’ expectations of Costco versus Apple. Costco customers expect barebones service in return for low prices, while Apple customers expect innovative products at relatively high prices. These firms deliver radically different experiences, yet they both delight customers. Should your company be like Costco or like Apple — or something else entirely?

The report uses Michael Porter’s three generic company strategies as a starting point to understand core value propositions that should drive the right customer experience strategy.

In researching the report, Adaptive Path’s VP of Creative Services Brandon Schauer was invaluable in pushing my thinking toward using Michael Porter’s generic strategies as a starting point. He had a couple of powerful insights that I think are worth mentioning:

1. “For customer experience leaders, the first big hurdle is to discern the organization’s business strategy.” I’ve talked with many firms in the process of changing their company strategy, which creates a moving target that is both a challenge and an opportunity for customer experience leaders.
    

One of my favorite customer experience graphics here at Forrester speaks to companies “making promises” through marketing and branding channels, while “keeping promises” by delivering value through other channels. However, there are external forces at play that raise people’s expectations. Companies like Google make us wonder why we can’t have good search when looking on a manufacturer’s site for a product; Trader Joe’s makes us wonder why floor staff at other stores isn’t as friendly and helpful; and Zappos makes us wonder why products don’t always arrive ahead of schedule.

I’ve taken liberties and updated the graphic to reflect that the “promises” companies make are really “expectations” that they set, and those are influenced by lots of external factors. In order to meet customer expectations — thus delivering a good experience — companies have to account for those factors that may lay outside of the firm or even the industry.

Why Does It Matter?

About 67% of companies that we surveyed describe their customer experience goal as simply trying to differentiate from competitors in their industry. But, they must also factor in the expectations set from outside of their firm or industry. Does this mean that every company needs to deliver a Zappos-like experience? Absolutely not! But it does mean that companies need to understand clearly what their customers really expect from them.

I’m delighted to return to Forrester and its Customer Experience team after eight years of running my own business and technology strategy consulting practice.  

I’m returning to the same group in which I worked before with Harley Manning and his team. It was in that group that I helped develop and implement Forrester’s Web Site Usability methodology, wrote reports like “Must Search Stink?” and “Smart Personalization,” promoted the use of customer data intelligence and CRM systems to drive proactive interactions that I called “Tier Zero Customer Service,” and reported on the uses of early community-based tools for customer service (today it's "social CRM").

A frequent question that I've been asked in the scores of phone calls over the past several weeks since my return has been: What are you going to cover? The short term answer is primarily four topic areas: