How much did your last Uber ride, hotel room, airline ticket, or Starbucks coffee cost? (No cheating — if you had to submit it on an expense report, that doesn’t count.) Now, which company have you recently engaged with that left you sitting on hold for customer service, or didn’t get back to you quickly, or shipped the wrong product and made the return process a nightmare?
I’m betting you remember the brand names of the latter “experiences” much more vividly than the previous — and you aren’t afraid to share them, either.
Recent snafus caused by subpar customer experience (CX) have made national and, in some cases, international news, including United Airlines (which dragged a passenger off one of its airplanes) and Wells Fargo (which signed up people for additional accounts without their consent). These two episodes erased much of the goodwill that these well-respected brands and their CX efforts had built up over many decades.
Unfortunately, many companies lose sight of CX and still have a narrow view of the drivers in delivering a compelling one—mostly because 1) they don’t agree on what a “compelling” CX actually is; 2) they don’t have a formal key performance indicator (KPI) to manage and track performance against; and 3) there is no “one” owner of CX, but rather many roles or people or functions responsible for pieces and parts of it.
Consumers today are more informed and demanding than ever of the business-to-consumer (B2C) brands they interact with. Many B2B brands make the mistake in thinking that all the hype around CX is applicable or valuable only to B2C companies. That couldn’t be further from the truth. You must remember that B2C customers, the ones who are more demanding and informed, bring the same expectations and purchasing habits into their workplace. Because of this, companies can learn and apply a lot from B2C companies in a B2B environment.
No amount of money, advertising, or vast product portfolio will make up for subpar customer experiences.
Make no mistake: Regardless of what industry you are in or what segment you serve, there is no way around this. Becoming a customer-led company, one that is obsessively focused on customers and their experiences with a brand, isn’t just one of many growth paths. It is the growth path that must become the foundation.
A great case study for growth through CX is Sephora, which has been a trailblazer in the beauty retail industry for decades. In 2016, it gained market share across all regions and recorded double-digit growth in both revenue and profits. More than 100 stores were opened in 2016; the brand has opened 70 new stores in the United States in 2017 alone.
From its early days, Sephora has been focused on inventing new ways to make the beauty shopping experience fun and engaging for its customers. Originally, it didn’t sell anything but other companies’ products. So, what made the brand so unique? Many would say it wasn’t what it sold but how Sephora sold it — and how its customers felt when they engaged with the brand and its employees.
Sephora was one of the first beauty retailers to organize stores by product instead of brand, launch an e-commerce platform, launch native mobile apps, utilize data from its Beauty Insider (loyalty) program to send personalized communications and recommendations, integrate with Pinterest, use advanced technology such as beacons in stores, introduce mobile point-of-sale (POS) systems—the list is long.
In its early days, Sephora, and its entrepreneur CEO, Dominique Mandonnaud, recognized that the context of the beauty business was changing from boutiques to large, multiproduct stores and from small-lot production of a finite number of items to vast catalogs of increasingly consumer-defined product lines.
Mandonnaud also was one of the first to recognize the increasing interconnectedness of discrete industries, such as cosmetics and perfumes, into a more monolithic “solutions”-oriented industry called “beauty.” Thus, the history of Sephora is the story of how Mandonnaud and those who followed him combined these different businesses and turned them into interactive (and eventually digital) customer experiences.
One of Mandonnaud’s first product innovations was what he called “assisted self-service” — essentially meaning that, unlike the rule at other cosmetics stores of the era, he let customers actually try products before they bought them. He used it to sell more products to existing customers, attract new customers, and optimize sales. Needless to say, this concept was copied and has since swept the world of beauty retailing.
The first sign that Sephora was going to do something new came in 1999, right at the peak of the e-commerce boom, when the company announced its first online store, targeted at the U.S. market. In an era when almost every other beauty product company was still selling its products in supermarkets, drugstores, and pharmacies, such a move was unorthodox, even shocking. Indeed, many of Sephora’s competitors didn’t take the same step for another decade — giving the brand a big head start.
In 2006, the ever-innovative Sephora was once again pushing the envelope. It wanted to get closer to an entirely new set of customers — those who weren’t interested in patronizing an exclusive beauty and cosmetic store. It began by opening small — typically 1,500 square feet — “pop-up” shops inside JCPenney stores in the United States. By the end of 2017, there were nearly 650 of them in operation, covering 75 percent of all JCPenney stores.
Crucial to Sephora’s success was the sequence in which it struck these partnerships, launched its own initiatives, and worked with previous competitors. A large part of what allows Sephora to continue to find growth opportunities is the usage of the data it collects. From point-of-sale machines and loyalty programs to online purchases and social media campaigns, Sephora’s ability to learn what its customers want and what they may want in the future helps it stay ahead in delivering a compelling customer experience over time, resulting in repeat and loyal customers.
As the definition of a customer evolves, some companies will need to consider that a customer could also be a thing: a smart refrigerator, a chatbot, etc.
Sephora also learned that there are two different types of beauty product customers: those who know what they want and those who want to try the items first, which meant that even as Sephora was showing strong growth on its own and through its partnership with JCPenney, it began selling its products on Amazon, once again using co-opetition to serve its common customers better. Whether it is in its own branded retail storefront, in a pop-up in JCPenney, or via (an online) partnership with Amazon, when it comes to growth, nothing is off the table if it meets customer expectations and satisfies pent-up demand.
The company’s newest concept, the Sephora Studio, a smaller store concept with high-tech beauty upgrades, pushes the CX envelope even further. Research found that 43 percent of consumers would pay up to 10 percent more for a personalized shopping experience, and brands that create personalized experiences by integrating advanced digital technologies and proprietary data for customers are seeing revenue increase by 6 to 10 percent — two to three times faster than those that don’t. That’s great news for Sephora, which, according to Sailthru’s first annual Retail Personalization Index, provides the most personalized customer experience in the beauty business.
There’s no way to fake your way through the customer experience growth path; no amount of money, advertising, or vast product portfolio will make up for subpar experiences. Using a customer-centric approach to achieve growth is to drive customer obsession throughout the entire organization. Today, you need an exceptional sales team. You need to have a strong marketing team. You need a responsive customer service team. By comparison, you may only need a “good enough” product. Don’t get me wrong: You can’t just have the best customer experience in town and serve terrible food or a subpar cup of coffee — or sell a product that doesn’t work.
In the future, as the very definition of a customer evolves, some companies will need to consider that a customer could also be a thing (refrigerator, piece of machinery, chatbot, etc.) or even a place (household, automobile, hotel). Gartner predicts that by 2018, 6 billion connected things will be requesting support. Think about it this way: Soon your automobile will not only be able to let you know it needs its oil changed, but it could also drive itself to the local auto mechanic to get it done — while you are working. Today, your smart appliances can reorder supplies when needed, like your washing machine knowing it has done 25 loads and needs more laundry detergent, or your air conditioner knowing it has been 90 days since you replaced the filter. While in these examples the machines are still serving people, this changes the business-customer relationship in a profound way.
Navigating a successful customer experience growth path can be a long, often confusing endeavor: long, because your relationship with customers can evolve over years, and confusing, because it is constantly changing and evolving and, on some occasions, counterintuitive — most of it now controlled by the customer and not you. In other words, you have the most control over your destiny by having the least control over what your customers actually do with you.