Why business needs to have feelings: The Experience Economy changes everything

The theme of London Tech Week was disruption, and we often think about that in terms of start-ups that make better use of technology and digital capabilities to rock or even overtake, big companies.

There’s no doubt that all industries continue to be shaken up in this way, but I want to write about a quieter revolution taking place today. The phenomenon is increasingly referred to as the Experience Economy and it requires us to look closer than ever at how customers, employees and partners think about us and to evolve our products, services and brands in ways that delight them. You might say that the future of business is about developing feelings.

Traditionally, companies have focused on producing commodities and then turned those commodities into products and then services. In the Experience Economy, companies today are turning services into experiences, so that customers become more loyal and even act as brand advocates, telling the world about how great a product or service is.

Improving what some call Experience Management is no easy feat, however, because it asks organisations to look at what happens every time a customer or an employee interacts with the product or brand. Customer, employee, product and brand: this is the critical quartet of factors that distinguish success from failure.

Experience happens across a host of touchpoints – from before the sale to long after. Ensuring delightful experiences across these touchpoints is a formidable scope. But with the right technologies in place, organisations can not only meet but exceed their customers’ expectations across the end-to-end experience, driving advocacy, passion and loyalty among their base, as well as lower churn and increase margins.

In some ways, this is not new. Before we started using terms such as Customer Experience and Experience Management we always had a sense of it being smart to delight audiences. The old wisdom that “the customer is always right” is rooted in a practical reality that if you treat customers with care, then they are more likely to come back and spread the word. You can see the positive effects of that in the reputations of great British retailers such as Marks & Spencer and John Lewis & Partners.

The difference today is that in the age of social media, comparison sites and user-generated content, this sort of advocacy is amplified to the nth degree. Also, understanding the customer experience is no longer “fluffy”: we can now measure the value and return organisations can attain by empathising better with the customer and optimising their experiences across every touchpoint.

Seventy-seven per cent of global GDP runs through SAP products, so we have a ringside seat for the impact Experience Management can have on the business. We believe that the stakes are very high here. Customers spend about three times more if they have a great customer experience. And while organisations reap greater margins, they are also countering the menace of customer churn – a $1.6 trillion issue across sectors. But you need to look at this with eyes wide open: 80 per cent of CEOs think they are delivering a superior experience to customers … and just eight per cent of their customers agree. So, we need to digitise our understanding of experiences and be empirical in our use of data.

To put this into context, look at what’s happening in transportation, where the traditional taxi business is being upended by ride hailing; in financial services, where mobile payments are replacing traditional transactions; or in education, where online courseware is displacing in-person course attendance and tutoring. Companies not competing on experience are ripe for disruption – if you’re not thinking about experience, you’re in the ‘disruption funnel’ and open to being overtaken by a brand that ‘gets it’. These seismic changes reinforce the need to scrutinise forensically what customers want and don’t want, what turns them on and what turns them off.

So, it’s important to treat your customers well of course, but that has to be scientifically applied. The Kmart store group had very high customer satisfaction ratings but still went bust because buyers were spending less than they had anticipated when they went into stores due to being underwhelmed by the customer experience. You need operational data as well as experience data. Data from operations will let you know about the nuts and bolts of cart abandonment, order value, bounce rate and conversion rate – the “what?” information. Experience data adds a “why?” axis, explaining emotions and sentiments from experiences. This information will tell you that your product may have been priced too high, delivery schedules were too slow, or a discount coupon didn’t work as intended.

Combine the what and the why and you have Experience Management and what company leaders have always wanted from IT: a rock-solid platform to make strategic decisions that delight customers. Look at The Philanthropy Centre, based in Plymouth, which used Qualtrics to increase its understanding of what motivates people to make charitable donations and helped partner charities to increase giving by up to 200 per cent. Or you can apply the same premise to understand what’s happening among your own people: how employees feel they’re being treated, trained and rewarded. The Imperial College NHS Healthcare Trust did just this and saw a sharp increase in employee engagement and patient care.

The Experience Economy is taking off right now and it’s an opportunity to steal a march on rivals by being smarter in the way you serve customers, partners and employees. By acting now and instrumenting for the Experience Economy, you can embrace a different sort of disruption and the implications will be enormous. Business is changing again — once more with feeling …

By Jens Amail, Managing Director – SAP UK & Ireland