Gupta & Vajic (2000) states that “a customer experience occurs when a customer has any sensation or knowledge acquisition resulting from some level of interaction with different elements of a context created by the service provider”.
Customer Experience Management (CEM) is a concept that describes how a company takes control of how it interacts with its customers. The goal of CEM is to optimize interactions from the customer’s perspective and foster customer loyalty. To manage the customer experience, a company needs to create a customer-centric strategy that encompasses all interactions. CEM requires companies have a 360-degree view of customers, with integrated, up-to-date data on customer accounts. Customer experience management is critical in financial services, as financial products by their very nature are similar in type, benefit, risk ; reward and what sets one financial service provider apart from its competitors are the experiences and service levels customers expect and/or receive when dealing with them. Some of the critical steps to creating a successful customer experience strategy include but not limited to the following: 1) Understand your customer. The first step in building a customer strategy is understanding customers’ needs and behaviours and creating customer segmentation based on these factors. 2) Create a customer vision. Once the target audience is identified, the next step is to create a customer journey map. This helps identify customer touchpoints and anticipate how customers will interact with the product or service and could help customer retention down the road. 3) Develop an emotional connection. This step involves creating a brand personality that evokes emotions and connections for a customer and helps establish a relationship between the customer and the company. 4) Capture customer feedback. It is important to measure customer satisfaction in real time. Customer feedback can help the company track customer perceptions, enable quality monitoring and measure the success of the customer experience strategy. Aligned to this is the 6 pillar framework for success, which further outlines the above in greater detail. Personalisation, Integrity, Time and Effort, Expectations, Resolution and Empathy. These 6 pillars are unique in their own right, however when combined they are powerful in terms of how financial service providers can attract, build, retain and foster long term relationships with both new and existing customers.
When we analyse the potential benefits to an organisation, customer experience management is the cornerstone for any financial service company to set itself apart from its competitors. Good CEM programs allow businesses to “close the loop” with customers, identifying in time those who are at risk of defecting, to pull them back into the fold. They also allow companies identify their biggest customer fans and single them out for loyalty rewards and promotional offers. Financial Services companies invest hugely on CEM programs, and the return on investment in well managed CEM programs translates into increased branch visits, online hits or transactions and increased traffic on banking apps, which ultimately result in an increased potential for customers to purchase more products. Managing customer experience properly can be hugely beneficial to a financial services provider in the customer retention strategies they may engage in.
These are vital for firms to ensure customers are frequent and repeat purchasers. Successful retention strategies driven out of a good CEM program will benefit the financial services company in 2 ways; (1) increasing the lifetime value of a customer, and (2) increasing the likelihood for upselling or cross-sales opportunities to the firms existing long term customers. Customers building up trust in a company and therefore reducing their perceived risk and transaction costs (fewer hassles), will be more receptive to offers that provide greater value and higher revenue. Example (Reichheld 2001), states that a 5% reduction in the customer defection rate can increase profits by 25 to 80%, and 7 out of 10 customers who switch to a competitor, do so because of poor customer experience.
For customer experience to be successful within financial services it needs to be all encompassing from the top of the organisation down to the frontline sales staff. Not only this, it needs to be cross divisional within the organisation and each division within the company needs to be aligned to the customer experience policy and beliefs within that organisation. For financial services firms specifically, these divisions can include marketing, product development, service operations, sales and information technology. For CEM to be implemented effectively it begins with the Marketing function. Marketing has to capture the tastes and standards of every one of its targeted market segments, circulate that knowledge within the company, and then tailor all consumer communications accordingly. Service operations or the back-office function must ensure that processes, skills, and practices are attuned to every touch point. (Present-patterns surveys are good for tracking high-volume touch points such as call centres.) Product development should do more than specify needed features. It should also design experiences after observing how customers use products and services, learning why they use offerings as they do, and figuring out how existing products might be frustrating them. Ideally, product developers will identify customer behaviour that runs counter to a company’s expectations and uncover needs that haven’t been identified. To support all of this, the financial services Information technology needs to be robust and intelligent to support the business. Effective information technologies can collect, analyse, and distribute CEM data, integrate the information with that generated by the financial services Customer Relationship Management platform, and monitor progress must be in place. As the data flow stabilizes, the form of presentation and its degree of detail should be keyed to whichever internal audience the data are meant for. The level of detail collated and disseminated must be relevant for the particular end user and must be fit for purpose. One of the key enablers for CEM to succeed, is the human resource or employees. Just as customers must have a good experience, employees need to have a good experience digesting information about themselves. Staff engagement is as important as a well-developed marketing strategy. A good human resources strategy should include a communications and training strategy that conveys the economic rationale for CEM and paints a picture of how it will alter work and decision-making processes. Since the frontline staff are key distributors and enablers of customers experience, it is always invaluable to study those employees’ individual capabilities, work processes, and attitudes. Motivated staff provide the best customer experience, and the key to developing customer experience excellence is ensuring staff are happy. Word of mouth is still one of the key barometers for a customer and satisfied customers will spread the word when they receive good service. As for performance management, of course customer experience results should affect compensation, however this must be balanced against the importance of looking after the customer as much as closing the sale. But as we have learned in recent years, with the backdrop to the financial crisis from 2008, incentives that are too powerful and more weighted to sales targets are more likely to distort behaviour than channel it productively. Financial services firms are moving towards rewarding staff for excellence in customer experience. This shift away from rewarding sales scores will be a contributing factor for success in years to come, as consumers become more aware of the experience of dealing with a particular firm or financial services provider and research shows they rate this as high as price when deciding on a particular product.
Market research and customer surveys are crucially important in todays’ financial services industry. The importance of capturing a customers’ experience of dealing with a particular provider, or their thoughts and feelings on a targeted product is fundamental to how well structured the customer survey is. When firms connect with customer emotions, the payoff can be huge. Research has shown that when a particular bank introduced a credit card aimed at millennials, that was designed to inspire emotional connection, use amongst the target market increased by 70%, the growth of new accounts rose by 40%. These emotional motivators can be used to gauge a customers’ future value to a firm, including brand awareness, and crucially customer satisfaction which can be the most important new source of growth and profitability. Account teams must progress from annual surveys to detailed touch-point analysis, then translate present patterns of customer experience and issues gleaned from recent transactions into action plans that are shared with customers. Online and banking apps are useful tools that financial services firms can use to really target customers to gauge satisfaction and/or experience. With the increase in online and mobile technologies, financial services firms can develop robust and subtle surveys that consumers can complete to provide insights into how they complete day to day banking and where they can seek improvements to their online or mobile offering. Leaders within financial services firms need to press the data to precipitate customers’ concealed longings. Customer dissatisfaction is widespread and, because of customers’ empowerment, increasingly dangerous. Although companies know a lot about customers’ buying habits, incomes, and other characteristics used to classify them, they know little about the thoughts, emotions, and states of mind that customers’ interactions with products, services, and brands induce. Yet unless companies know about these subjective experiences and the role every function plays in shaping them, customer satisfaction is more a slogan than an attainable goal.