The customer experience drives loyalty, but that's not the whole picture

Every era has its management buzzword. Just to mention a few examples, we've experienced phases like "net promoter score," "big data," "IoT," and "disruption." Right after "AI," "customer experience" is the leading trend today, particularly in digital channels, customer interactions, or service design. But what does it mean, and how does it fit into the bigger picture?

Prioritizing customer experience in a competitive market. In today's competitive landscape, it's no longer enough to simply rely on product features for success. Instead, customer experience has emerged as a crucial factor. The understanding that growth is driven by customers, not just products, underscores the importance of cultivating a loyal customer base and maximizing customer lifetime value for sustainable growth.

Creating a superior customer experience requires more than just a strong service design team.

We all agree that the final product or service delivered to the customer is just the tip of the iceberg, the last stop on the train station. To truly drive customer experiences, much more is needed than a good service design team. The organization's foundational elements must be driven by customer insights that are built into the process. This includes business planning and development processes, defining business offerings, governance models (e.g., which key metrics are used), ways of working, corporate culture, etc.

Loyalty beyond experience: Trust and emotions as key drivers

What is needed is a paradigm shift from a product-driven to a customer-centered operation. This change involves, among other things, altering the organization's foundational principles.

The key assumption advocated within customer experience is that customer experience drives loyalty and, in the long term, loyalty drives business value (figure 1). This is indeed true. However, customer experience is not the only driver of loyalty. Trust and emotional investment are equally important.

On one hand, there is trust. Trust is earned when a company is truthful and reliable and when it keeps its promises. More than ever, an increasing number of products and services are purchased through digital channels, where transactions occur without any human interaction. Trust therefore enhances the security one feels towards a company, making it an inevitable measure that drives loyalty.

On the other hand, there is emotional investment. This is when customers share the company's values and fundamental morals and thereby personally want to see the company succeed. In reality, it's the same feeling you have for your favorite sports team; you support it at all costs, even when it's not doing well. Emotional investment is one of the key drivers for brand advocacy and thus loyalty.

Therefore, customer experience is not the only driver of loyalty. The emotional investment your customers have in your brand plays a critical role too. In an era where much focus is on customer experience, the brand is still relevant.

The customer experience is the tip of the iceberg (figure 2). To succeed, you must lay a foundation that includes culture, business development, ways of working, and planning. The foundation of all this is a customer insight-driven approach that requires several functions to be established, such as data management and customer analytics. It also requires a democratization of data, making insights accessible to business users throughout the organization.

Customer centricity and customer experience are becoming increasingly important and can provide companies with a real competitive advantage if well orchestrated. Transforming an organization from being product-oriented to becoming customer-centered can be a challenging journey that requires careful planning.

Start by mapping the current state related to business planning, governance, working methods, etc. Then identify what actions can be taken in each area, considering your current level of maturity and what you believe will have the best impact.