Sam Walton has been quoted as saying, “There is only one boss. The customer.” It’s an ideal that businesses have held for decades, during which time they started to validate quantitatively the fact that increased levels of satisfaction would typically lead to customer loyalty. And that's important because the more loyal your customers are and the more loyal customers you have, the more they'll buy from you, the more they'll refer you to others, and the less effort you'll have to put in to sell to them.
Over time, customer satisfaction has evolved into customer experience (CX). As such, the focus became more on the delivery of the experience, the measurement of the experience, and the quality of the experience, without necessarily looking at the result: whether the customer is becoming more loyal or not. If the field keeps going in this direction, we believe it will suffer the same fate as customer relationship management (CRM), once a broad management philosophy and now simply a piece of software. Here’s what’s leading to the decline in CX and how to revitalize the field.
CX and Business Strategy: The Missing Link
The field of CX is intended to be a big-picture view of how your customers feel about their dealings with your organization and, as such, a key part of business strategy. However, if measuring a customer’s experience doesn’t give you insight that will drive loyalty, does it really help you? For example, if a customer went to a restaurant and had an amazing experience, chances are they’d probably want to go back. But the most important factor is not necessarily that they had such a great experience; it's that you identified what it was that made that customer want to go back. Without knowing that, you can’t replicate it. Or improve upon it. And many today are forgetting to look at that linkage, rendering CX measurement much less impactful than it should be, and it shows.
In fact, according to Forrester's 2024 Customer Experience Index, CX scores among U.S. businesses have reached their lowest point ever, marking the third consecutive year of decline. Moreover, while a Bain & Company report found that 80% of executives believed their company delivered a superior customer experience, only 8% of customers agreed, indicating a significant disconnect.
At the same time, while businesses can’t afford to lose customers, many are facing pressure to reduce the cost of serving customers, viewing customer service and all other areas of an organization contributing to a positive and differentiating customer experience as cost centers rather than avenues for a competitive advantage.
Similarities Between CX and CRM
In its early days CRM was seen as a business strategy focused on building strong, personalized relationships with customers, which were nurtured by understanding needs, fostering loyalty, and creating value over time.
In the 1980s, growing businesses turned to technology (at the time, databases) to store customer information and contact histories in order to make the management of individual relationships easier. The 1990s brought more advanced CRM tools with features such as tracking customer interactions, managing sales leads, and automating marketing campaigns. This phase of CRM marked the shift from purely relationship-driven management to a process-oriented approach that involved measurable tasks and steps.
However, the rise of cloud computing, then automation, and now AI to streamline and facilitate the process of managing customer relationships have made CRM even more of a technology-driven, tactical tool than a strategic approach.
We believe that CX is following a similar path, devolving into a routine, automated task that’s detached from its core purpose of enhancing customer loyalty, ultimately losing its strategic and customer-centric focus. For example, bots are a way to decrease the cost of customer service, but they rarely enhance the experience!
The Root Cause: Losing Sight of Customer Loyalty
So, what’s happening in the field of CX that’s causing this shift? Businesses are losing sight of customer loyalty. Why? A key reason is the overemphasis on metrics. Focusing solely on metrics like Net Promoter Score (NPS) can lead to neglecting the deeper aspects of customer relationships and loyalty. The focus should be on the customer and how they feel!
Specifically, in the aforementioned 2024 Customer Experience Index from Forrester, in addition to 39% of brands and 10 industry averages declining over the past year, CX performance dropped across all three dimensions of CX—effectiveness, ease, and emotion. This highlights the consequences of neglecting genuine customer engagement, as customers themselves are expecting more and more from their experiences.
CX at Its Best: Loyalty as the North Star
Yet, when businesses focus on customer loyalty and put customer needs, desires, and satisfaction at the forefront of all their decisions and actions, they report 41% faster revenue growth, 49% faster profit growth, and 51% better customer retention than those at non-customer-obsessed organizations, according to Forrester.
An example of this is Chewy.com, which is one of the few brands that have consistently topped Forrester’s CX rankings by focusing on customer loyalty. Specifically, the online pet food and supplies retailer has invested in building an emotional connection with customers to foster that loyalty.
Recommendations for Revitalizing CX
All is certainly not lost when it comes to the field of customer experience. We believe it can be revitalized through recommendations that include the following.
CX as a Strategic Imperative
While CX is not dying, it does risk becoming ineffective if it shifts away from its core focus on customer loyalty. As such, businesses must realign their CX strategies toward building and maintaining customer loyalty to drive sustainable growth.
To continue the discussion, or to see how Phase 5 can put our CX expertise to work for your business, contact Stephan Sigaud.
You can also read our article on CMSWire.