Contents

CHAPTER ONE ..................................................................................................................................... 4

INTRODUCTION TO CUSTOMER EXPERIENCE MANAGENT (CxM) ...................................................... 4

CUSTOMER EXPERIENCE MANAGEMENT DEFINED .......................................................... 5

Origins............................................................................................................................................. 5

Customer service vs. customer experience ..................................................................................... 5

Customer experience challenge ...................................................................................................... 6

Defining CEM/ CxM ...................................................................................................................... 7

CRM vs CEM ............................................................................................................................... 10

Why customer experience management is important?.................................................................. 11

Experience vs Services.................................................................................................................. 12

CHAPTER TWO .................................................................................................................................. 13

CUSTOMER EXPERIENCE MODELS AND CASES ................................................................................. 13

The Four Stages of the Customer Experience (Tom Sweeny; 2014) ............................................ 13

The Journey vs. Outcome.............................................................................................................. 15

The Customer Journey Of Experience .......................................................................................... 16

CASES .......................................................................................................................................... 21

CHAPTER THREE .............................................................................................................................. 28

MANAGERIAL ELEMENTS OF CEM .................................................................................................... 28

Customer experience in retail stores/service centres .................................................................... 29

Leisure, Joy, Distinctive and Mood. ............................................................................................. 29

Customer experience in the online environment ........................................................................... 31

CHAPTER FOUR................................................................................................................................. 32

CUSTOMER EXPERIENCE: SUPPORTING INGRIDIENTS ..................................................................... 32

Customer engagement by customer care reps ............................................................................... 32

Service delivery ............................................................................................................................ 33

Customer Service .......................................................................................................................... 33

Customer Satisfaction ................................................................................................................... 34

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 Customer loyalty ........................................................................................................................... 36

Customer retention ........................................................................................................................ 37

Customer delight ........................................................................................................................... 40

Loyalty schemes............................................................................................................................ 42

The role of research....................................................................................................................... 48

Customer experience design ......................................................................................................... 53

Customer Experience Mapping..................................................................................................... 54

CRM Technologies ....................................................................................................................... 57

Service Recovery .......................................................................................................................... 65

CHAPTER FIVE .................................................................................................................................. 69

MEASURING CUSTOMER EXPERIENCE .............................................................................................. 69

Measuring improvements towards better customer experience! ................................................... 69

Net Promoter Score ....................................................................................................................... 73

Voice of Customer ........................................................................................................................ 74

Customer Effort Score .................................................................................................................. 75

Measuring Customer Satisfaction ................................................................................................. 77

CHAPTER SIX ..................................................................................................................................... 79

CUSTOMER TOUCH POINTS ....................................................................................................... 79

Customer Touch Point Defined..................................................................................................... 79

Understanding Customer Touch ................................................................................................... 80

Touch Point Categorization .......................................................................................................... 82

Touch Point Evaluation................................................................................................................. 84

Inventory Your Touch Points ........................................................................................................ 86

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CHAPTER ONE
Key questions will be addressed

 Why study customer experience

 What is a customer experience?
 How do organisations design a better customer experience map?

INTRODUCTION TO CUSTOMER EXPERIENCE

MANAGENT (CxM)

A shift from a global economy dominated by the industrial sector to an economy dominated by
services has prompted academics to explore new ways of thinking regarding on how to build
powerful brands premised on legendary customer experience. According to the McKinsey Global
Institute's report on Africa (2010), the services industry is fast emerging as the future of global
business and will account for at least half of the continent's Gross Domestic Product. Recently,
Forrester Research (2010), which is a leading independent research company in service business
and technology, has released the Forrester’s Customer Experience Index (2010) to measure the
customer experience based on evaluations from more than 4,600 companies results reveal that
modern marketers are rediscovering that the ancient mantra in marketing practices are becoming
absolute for success in the modern day corporate world competing on services offering. Long term
survival and competitive advantage can only be attained by establishing an emotional bond with
the customers (Jones; 2012). Companies will never have a product or price advantage again, for
this can be easily duplicated, but a strong customer service culture can't be copied (Jerry Fritz).
One way in which these companies could differentiate themselves in the market is through
utilization and adoption of customer experience management strategies. This module further the
student’s understanding of the levels of adoption and utilisation of Customer Experience
Management (CEM) as a business concept. In this regard, it is also vital to note that, customer with
good experience is six times more likely to be loyal, repurchase and recommend a product than a
customer a customer who is just satisfied. It is again believed that a satisfied customer tells five
other people about their good treatment and that five percent increase in loyalty can increase
profitability by 25-85%. Conversely the average customer with a problem eventually tells eight (8)

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to ten (10) people (Limayem: 2007). These scary statistics clearly portray the impact of customer
experience management on business growth and sustainability. This makes it imperative for
organisations to make pragmatic and reliable steps towards improving the quality of service
delivery and customer experience.

CUSTOMER EXPERIENCE MANAGEMENT DEFINED

Origins

Pine and Gilmore (1998 and 1999) were some of the first writers to address the notion of the
customer experience (see also Carbone and Haeckel 1994 and Johnston 1999). In their paper in
1998; “Welcome to the Experience Economy” and their book the following year; The experience
economy – Work is theatre and every business a stage, Pine and Gilmore observed that as services
are becoming more commoditised leading-edge companies are competing on experiences. The idea
of the customer experience appears to have resonated with practitioners and academics alike and
many managers and service researchers now talk about the customer experience. However,
research on the customer experience appears to be in its infancy, certainly compared to service
related topics such as service quality and loyalty. Furthermore, the customer experience is
sometimes seen only as an issue for „entertainment‟ type organisations such as theme parks
(experience-centric organisations – see Zomerdijk and Voss 2010). However the literature suggests
that whatever the service (or indeed product) a customer is buying or receiving, that customer will
have an experience; good, bad or indifferent, i.e. a service always comes with an experience
(Carbone and Haeckel 1994) and that all service encounters provide an opportunity for emotional
engagement, however mundane the product or service might be (Berry and Carbone 2007, Voss
and Zomerdijk 2007).

Customer service vs. customer experience

There is a trending conversation discussing the difference between customer service vs. customer
experience. Customer experience is a fairly new topic that is starting to gain traction due to a
broader range of what it actually covers.

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Most agree that customer service stops with the physical interaction of a customer engaging
with a company. This is usually direct communication using the phone, email, chat, social
media or snail mail. Customer experience casts a broader net in that it not only covers the
customer’s direct interaction with the company, but includes all touch points the customer
may engage with the company. Each of these touch points need to create a consistent feel
and experience with the customer.

Customer experience challenge

The customer experience challenge that seems to be emerging from the available literature is
how can organisations systematically engineer their customer experiences (Carbone and
Haeckel 1994) in order to achieve the „triple bottom line‟ i.e. to make them not only better
for the customer but also better for the organisation’s staff and better for its „bottom line‟ i.e.
cheaper and more efficient (Bate and Robert 2007, H.M. Government 2007). While there is a
literature on service quality improvement focused primarily on delivering better service for
the customer, the customer experience literature appears, in the main, to be limited to
coverage about the nature of the experience and the provision of a number of operational
tools and techniques. There appears to be a knowledge gap about how, at a more strategic
level, organisations can go about improving specifically their customer experiences to try to
achieve a triple bottom line.

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Defining CEM/ CxM
Customer experience: “Customer experience is the internal and subjective response
customers have to any direct or indirect contact with a company.” (Meyer and Schwager
2007: 118). Shaw (2002) adds elements into this definition. “It is a blend of an
organization’s physical performance, the senses stimulated and emotions evoked, each
intuitively measured against customer expectations across all moments of contact.” (Shaw
and Ivens 2002: 7) “Customer experience is defined as your customers’ perceptions – both
conscious and subconscious – of their relationship with your brand resulting from all their
interactions with your brand during the customer life cycle.”
As for customer experience management, Gartner; 2013 sums it up pretty well in its
definition: “the practice of designing and reacting to customer interactions to meet or exceed
customer expectations and, thus, increase customer satisfaction, loyalty and advocacy.”
“Therefore basing on the two definitions Customer experience (CX) is the sum of all
experiences a customer has with a supplier of goods or services, over the duration of their
relationship with that supplier. “
Customer experience management is about more than serving your customers. It’s about
more than knowing where customers shop and what brand of food they buy. It's about
knowing your customers so completely that you can create and deliver personalized
experiences that will entice them to not only remain loyal to you, but also to evangelize to
others about you – and that’s the most valuable form of advertising there is.

Life is about experience – personal or social, leisure or business. Think about the way you
live, love, work and play, from daily routines to critical life‐and‐death issues; like it or not,
you have to walk through (experience) them all, day by day, piece by piece.
Some experiences are created by you alone, like ‘thinking’. Some are created with others,
like ‘fall in love’. Some are ‘outsourced’, like ‘happiness at Disneyland’. Time is the vehicle
(tool) to deliver the means (experience). If you regard time is precious, experience is
priceless. Your role of consumer would naturally drive you to look for brands who could
deliver ‘feel good’ experiences, not just for time‐saving and convenience.
CEM is about Perception. As a marketer, if we know consumers are looking for “feel good”
experiences, how can we create and even clone them? When and where at what frequency?
‘Satisfaction’ is no longer a reliable metric. Listen to the voice‐of‐customer via interviews,

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surveys, focus groups, observations, etc. Believe it or not, consumers make most of the
buying decisions subconsciously.
Nobel Prize‐winning psychologist Daniel Kahneman said we could only remember two
things from our experiences: how we feel at peak (best or worst) and at end. These memories
direct our next buying decisions; whereas the proportion and duration of pleasure / pain
throughout the whole experience process does almost nothing on our memories, thus
perceptions.
‘Feel good’ is a perception. You perceive everything through your five senses: sight,
hearing, smell, taste and touch. For a normal perception process, you have to send the five
senses’ messages to your brain, then mind. There is a missing link between from what
consumers perceive to their ultimate behaviours – what goes on inside the mind?

CEM is about Process

Process refers to the entire experience that consumers interact with the company throughout
the whole customer cycle, from Pre‐purchase /consumption, At‐purchase to Post‐purchase,
via multi‐channel touch‐points. This may include retail (in‐store), call, Internet, face‐to‐face,
advertising, direct mails, public relations, etc. These touch‐point experiences, together with
product experiences, would echo the two MOTs (moments of truth): when you buy, when
you use. One of the challenges (and opportunities) of CEM is to deliver an aggregate and
complete end‐to‐end experience, not just a single touch‐point, transaction or product
experience. For vacation resort, the end‐to‐end experience may take several weeks. For credit
card, it may be years. For PC it may be three years, or more. No matter which industries
you’re in and what products or services you provide, the capability to deliver consistent and
valuable end‐to‐end experience to consumers will dictate your competitive positioning.
Another challenge (and opportunity) is to co‐create these experiences together with your
employees and consumers. The ‘book reviews’ at Amazon.com, the ‘fun experiences’ on
Southwest plane, the ‘third living lace’ environment at Starbucks are good examples.
Companies could design the framework and infrastructure, but employees and consumers are
the ones who take the play! To be success in CEM, it must be engaging. You will feel
different (most of the time is better) when you’re engaged. To engage your consumers, first
you’ve to engage your staff. It’s not what we experience but how we experience. Engaging is
the keyword.

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CEM is about Brand
This is the missing piece in the broad word of CRM. Brand is not built by advertising. Brand
is the perceptions on aggregate experiences of customers (and public) across all touch‐points.
CEM is not effective unless it is branded. Branded customer experience is to amplify your
brand via intentional and consistent delivery of on‐brand experiences across all touch‐points.
Only when you’re branded, you could differentiate. Only when you’re differentiated, you
could have loyalty. There are three elements required for branded customer experience: the
peak & end (most memorable) experiences, brand values and consumer needs. To optimize
the branded experience, you have to deliver your most unique brand values and meet
(exceed) the most critical needs and expectations of your target customers by peak & end
experiences. The challenge of customer service nowadays is, good service is not enough, you
need differentiated (branded) service. The experience‐based differentiation allows you to
control the definition of good experience or service, direct and educate the expectations of
your target customers.
Customers receive some kind of experience, ranging from positive to negative, during the
course of buying goods and services. Furthermore, it has been shown that a customer’s
perception of an organisation is built as a result of their interaction across multiple-channels,
not through one channel, and that a positive customer experience can result in increased share
of wallet and repeat business. As employees create or deliver positive experiences for
customers, they in turn, receive positive experiences through feedback and recognition,
leveraging the benefits of positive customer experience to the company or institution. A
company's ability to deliver an experience that sets it apart in the eyes of its customers serves
to increase their spend with the company and, optimally, inspire loyalty to its brand (Peppers
and Rogers 2008). With products becoming commoditized, price differentiation no longer
sustainable and customers demanding more, companies and communication service providers
(wireline, wireless, broadband cable, satellite) in particular should focus on delivering
superior customer experiences.
A Strativity Group (2011), study of over 860 corporate executives revealed that companies
that had increased their investment in customer experience management over the past three
years report higher customer referral rates and customer satisfaction. This finding is also
supported by research completed by software company Chordiant (2008) into the customer
experience management performance of large organisations across Europe. Rogers (2008)
postulated that the research surveyed 450 large organisations to create a maturity model and

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the results showed that over ¾ of the organisations surveyed achieved level 3 (of 5) or less
for CEM performance (5 being best possible result). The results also showed that
performance in four key business areas (market share, retention, profitability, and customer
satisfaction) was directly related to CEM performance. The customer experience has emerged
as the single most important aspect in achieving success for companies across all industries
(Peppers and Rogers 2005). Rae, Jeananne (2006 used an example, of Starbucks which spent
less than $10 million on advertising from 1987 to 1998 yet added over 2,000 new stores to
accommodate growing sales. Starbucks popularity is based on the experience that drove its
customers to highly recommend their store to friends and family Bernd H. Schmitt (2003).
Wheeler (2002) pointed out that the goal of customer experience management (CEM) is to
move customers from satisfied to loyal and then from loyal to advocate.

CRM vs CEM

Traditionally, managing the customer relationship has been the domain of Customer
Relationship Management (CRM). However, CRM strategies and solutions are designed to
focus on product, price and enterprise process, with minimal or no focus on customer need
and desire. The result is a sharp mismatch between the organisation’s approach to customer
expectations and what customers actually want, resulting in the failure of many CRM
implementations. Companies are focusing on the importance of the experience and, as Bernd
H. Schmitt (2006) noted, “building great consumer experiences is a complex enterprise,
involving strategy, integration of technology, orchestrating business models, brand
management and top management commitment”. According to Schmitt, 2006 "the term
'Customer Experience Management' represents the discipline, methodology and/or process
used to comprehensively manage a customer's cross-channel exposure, interaction and
transaction with a company, product, brand or service. Lopez, Maribel D. (2007.
The concept of customer experience spans over different stages: pre-experience, the actual
experience and post-experience. An example of a pre-experience may be an easy access to a
certain shop which is an influencing factor outside the actual customer experience but an
important example of how stress free and effortless the whole experience can be. The actual
experience is the stage that a company has most control of. A good customer experience also
takes into consideration the outside factors influencing the experience. The post-experience
has plethora of different aspects to consider such as delivery, after-sales service, user manuals,
customer support etc. All these stages are considered as part of the whole customer

10
experience (Shaw 2007: 36). Experience extension is a concept where companies seek to
influence factors outside their direct customer experience (Shaw 2007: 38).
The physical side of the experience consists of prize, product, availability, accessibility,
efficiency, and time of day, ease of use, sales and delivery channel. More importantly,
customer experience is about emotions, research showing that over 50% of a customer
experience is based on emotions (Shaw 2007: 8). A customer experience is delivered
whenever a customer comes in contact with the company: through advertisement, websites,
interaction with delivery personnel, physical shops, dealing with customer service and
customer support. When defining a success level of a touch point, it comprises the customer
expectation, customer experience and the gap in between what spells the difference of the
targeted experience and something less. These expectations may be the result of the
customers’ past experiences with the company’s services, the competition, possibly the
market conditions and to quite large extent the customer’s personal situation. Customer
Centricity is a strategy to fundamentally align a company's products and service with the
wants and needs of its most valuable customers (Goodman 2009).

Why customer experience management is important?

The concept of customer experience may sound idealistic or touchy-feely, but anyone who
dismisses it as such is woefully out of touch. In fact, customer experience has become a
critical differentiator in today’s hyper-competitive, hyper-connected global marketplace.
There’s tangible business value in managing the customer experience effectively. Good
customer experience management can:
 Strengthen brand preference through differentiated experiences.
 Boost revenue with incremental sales from existing customers and new sales from
word of mouth.
 Improve customer loyalty (and create advocates) through valued and memorable
customer interactions.
 Lower costs by reducing customer churn etc

Several authors (see for example Pine and Gilmore 1998 and 1999, Shaw and Ivens 2002,
Voss 2003, Prahalad and Ramaswamy 2004, Meyer and Schwager 2007), have made the
point that the customer experience may provide a new means of competition. Providing a

11
good experience is also important because it affects customer satisfaction (Liljander and
Strandvik 1997), delivers customer loyalty (Yu and Dean 2001, Pullman and Gross 2004,
Mascarenhas et al. 2006), influences expectations (Johnson and Mathews 1997, Flanagan et
al. 2005), instils confidence (Flanagan et al. 2005), supports the brand (Grace and O‟Cass
2004 Berry and Carbone 2007) and also creates emotional bonds with customers or,
conversely, leads to emotional scarring (Pullman and Gross 2004). However, despite these
benefits, the limited amount of research in this area suggests that good customer experiences
are not prevalent. For example, a recent survey by Bain & Co. of 362 companies, across
several industries and their customers, found that 80 per cent of the senior executives
interviewed said they provided a superior customer experience, but just eight per cent of their
customers agreed (Coffman and Stotz 2007).

Experience vs Services

There appears to be a good deal of confusion in the literature about the definition of an
experience and its difference to a service. The first step is to try to clarify this, starting with
the definition of a service. There is an enormous range of services available from a vast range
of organisations, including business-to-business, business-to-consumer, the public sector and
voluntary organisations. It is therefore perhaps not surprising that there appears to be no
single, agreed and comprehensive definition of what a 'service' is (Haywood-Farmer and
Nollet 1991, Sampson and Froehle 2006). Services are sometimes defined as something
intangible (see for example Gummesson 1987), however many services also include some
tangible elements (Johnston and Bryan 1993). While there is as yet no agreed definition of
service there are the beginnings of an emerging consensus. A product is a thing whereas a
service is an activity - a process - which involves the treatment of a customer (or user) or
something belonging to them, where the customer performs some role in the productive
activity, i.e. the steps in the service process (Wild 1977, Sampson 2005, Sampson and
Froehle 2006). Defined as such, „service‟ is much more than the point of staff-customer
interaction, sometimes referred to as customer contact (Chase 1981) or the moment of truth
(Normann 2000). To make sense of the existing literature it is helpful to consider two
perspectives on service, the service provided from the operation’s point of view and the
service received from the customer’s point of view (see Figure 1) (Ding et al. 2010, Johnston
and Clark 2008).

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CHAPTER TWO

CUSTOMER EXPERIENCE MODELS AND CASES

Key Questions to be answered after this Chapter

 What are the successful CE models being used by leading organisations?

 What are the key success factors for CEM
 How do we implement CE in different organisational settings?
 Which leading organisations successfully adopted CEM

The Four Stages of the Customer Experience (Tom Sweeny; 2014)

The way we interact with customers directly affects the way they perceive us. When we are
responsive, attentive, willing and able to provide the information or assistance they need, we
increase the likelihood of providing a positive experience. When we are difficult to do
business with, unable or unwilling to satisfy customers’ needs, indifferent, inept or rude,
chances are the customer will have a bad experience.
A satisfying customer experience is critical if we want to positively influence the way
customers behave. Anything less — even if it’s just a neutral experience — is not sufficient
to compel the behaviours we want. Customers that have a positive experience are three times
more likely than customers with a neutral or negative experience to buy a product from the
company that delivered the experience; four times more likely to recommend a company or
renew an existing relationship (e.g., a service contract); and five times more likely to state
that they are satisfied with the outcome of the interaction. While companies generally agree
that a good experience is something to strive for and a bad experience is something to avoid,
they find it’s not always easy to provide the experience customers need or expect. The first
step to creating a positive customer experience is to understand the critical elements that
shape the experience. It is also imperative to recognize the phenomenal impact the web has

13
on shaping customer experiences and the new challenges introduced as we move more
customer interactions on-line.

Elements of a Successful Experience

Whether it’s delivered on-line, by phone or in person, the customer experience should be
governed by the same basic principle: Customers have an objective in mind and want to
achieve it quickly and efficiently. Their goal may be to purchase a new product or get help
with something they already own. Regardless of the objective, there are four basic elements
that define the experience customers have in driving towards their desired outcome. These
elements are:
Exploration, Formulation, Validation and Action.
Exploration is the first step in the customer experience. At this stage the customer is looking
for the tools, resources and information that will help them chart a course to their final
objective. In many cases, the customer does not know what the end result will be and have
only a general idea where to start their journey. For example, when a customer is researching
a product to purchase they may know that they want an MP3 player, but may not know which
make or model is right for them. They may not know the price range of such products or
where to buy one. Their experience begins by exploring the possible options, including
available products, features, price, etc. This exploration phase also applies to services.
Customers may know that they have a problem, but may have no idea what the underlying
cause is or how to get it resolved. They begin their experience by searching for information to
help them isolate and resolve the issue.
Formulation - Initial discovery of possible options can often complicate a service or
shopping experience. A process that began with a simple objective — to purchase an MP3
player — has blossomed into a ‘situation’: customers find they can choose from dozens of
manufacturers, all with models offering different features and price points. As the customer
experience continues, the effort focuses on the formulation of a desired outcome. In product
research and e-commerce scenarios, the customer begins to make decisions about what
product features and price are of most interest.
Validation -The quality of a customer experience depends on more than whether the
customer chose the right product to buy or figured out which solution would solve a problem.
A complete customer experience requires that the course of action selected by the customer –
deciding to buy a specific make and model of MP3 player – is validated by objective

14
evidence. Validation may come in the form of professional reviews, magazine articles,
comments from peers, and other trusted sources.
Action - The final stage of the customer experience is the action a customer takes to achieve
their desired outcome. This action may take the form of a product purchase or the satisfactory
resolution of a service issue.

The Journey vs. Outcome

While the four elements described above describe the stages of customer experience, the
experience itself is best defined as the way in which these stages unfold as the customer
journeys toward the desired outcome. To be successful, a customer experience must have a
satisfactory outcome. Moreover, the path to this outcome must be perceived to be productive,
efficient, and even enjoyable.
Figure 1: The Journey to a Positive Customer Experience

Many factors affect the customer experience. While no two customers are alike, every
customer experience shares basic characteristics that help to assure that the flow of the
experience is positive and the elements of the experience are fulfilled. Basic stages of the
experience include:
 A Starting Point – Customers need to know how to begin their journey. Where
should they start, what should they do first, and what information do they need to
proceed?

15
  A Road Map – As customers navigate their way from exploration to action they need
to know how to take each subsequent step in the process. Instructions, guides, and live
assistance can all be used to keep the customer on the track to their desired outcome.
 A Destination – Every experience has a desired outcome. At the beginning of the
journey the customer may be unsure of the outcome, but they at least have a direction
in which to head. As the journey towards the destination progresses, a positive
experience will help to refine the characteristics of the final goal (e.g., select a product
to buy or receive an answer to a service issue).
The goal is to create a situation where customers feel that the journey to their desired
outcome is easy and relevant to their needs. If a company can’t meet customers’ needs and
provide a reasonably acceptable experience, then they will likely choose an alternative path to
their destination.

The Customer Journey Of Experience

‘What we put our customers through if they wish to do business with us’.
In this example there are eight main stages for someone making a business purchase. Other
types of purchase would have more or less stages of different types.

Stage 1 – Need - I’m considering a purchase – who should I approach?

Stage 2 – Enquire - I make general enquiries to possible suppliers.
Stage 3 – Approach - I decide to make more specific enquiries to a selected few.
Stage 4 – Recommendation - They make recommendations and/or send proposals.
Stage 5 – Purchase - I decide to purchase and place my order with one supplier.
Stage 6 – Experience - They supply and I use the product or service.

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Stage 7 – Problem - I have a problem that is reported to and handled by the supplier.
Stage 8 – Reconsider - I’m considering purchasing something else – should I go back?
At each of these stages we could break the customers experience down even further into
smaller elements. For example, in the Approach stage, if it involved a sales visit, we could
have:
 The promptness of the sales person
 The appearance of the sales person
 The politeness of the sales Person
 How much interest they demonstrate in my business and my needs
 How much they know about their product and how it will help my business (linking
their product/service to my specific needs)
 My perception of their enthusiasm and commitment
 How much confidence they build in me for them and their company

Each of these elements, no matter how big or small, will have some impact on the customer’s
experience and therefore will in some way influence the purchasing decision.

The four centric Customer experience model

The four concentric rings in the diagram represent the four stages of creating what an
‘Addictive Customer Experience’. That is the type of experience that when encountered
makes the customer want it again and again. If we now look at this diagram, which shows
one of the segments in the overall experience, we can consider in detail what the four stages
are.

Stage 1 - Insatiable Curiosity - Understand Customer Needs

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The base stage or foundation is where you understand the needs and expectations of your
target customers. Think of this stage as ‘hearing voices’ - the voice of the customer, the voice
of employees, the voice of suppliers, the voice of the market and the voice of the company
owners. The goals should be to understand these voices and get closer to your customers than
any competitor. This is done through constantly gathering feedback, in as many ways as you
can, and ensuring that your people are encouraged to get and then stay as close to customers
as possible.
Having done this you must decide what you will (and will not) build into your brand
promises. If you make these choices intelligently, and sometimes bravely, you should create a
mix of things that collectively will make you distinctive and create competitive advantage.
When this stage is complete the customer reaction is likely to be one of interest. You will
have something different, distinctive and focused on their needs, which should warrant more
of their attention – but not much more.

Stage 2 – Absolute Reliability - Match Customer Needs

In this stage you deliver your brand promises with predictability and consistency that amazes
your customers and outflanks your competitors. This is where you must create the principles
and processes to ensure that you always match customer needs. The goal here is to deliver
perfect service and it is where the techniques of Six Sigma will have their greatest application.
When working, this stage will create customer satisfaction. Many people expect success here
to create more than satisfaction but research confirms that just delivering what customers
expected, or what you promised, will simply create satisfaction. (This research also shows
that mere satisfaction rarely leads to loyalty – so more is needed.)

Stage 3 – Dazzling Spontaneity - Add Something Extra

This is the stage where you move on to surprise, dazzle and delight your customers with
unexpected acts that consistently exceed their expectations. These things could be called
“WOW” moment – the little things that make big differences to customers.
The best ones are spontaneous and different every time. Many successful organizations have
found ways to make these a key part of their ‘style’ of doing business. Service recovery
techniques are also important here to ensure that any failures that do occur in Stage 2 don’t
lead to customer dissatisfaction. This is the stage where satisfaction is turned into delight. It’s
these unexpected little things that make all the difference. But they will only work when
Stages 1 and 2 are in place first.

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Stage 4 – Heart Felt Empathy - Do it with Emotion
In this final stage you demonstrate a closeness to, and an empathy with customers. If you do
this right you will touch their emotions in ways that can lead to life-long loyalty. You do it by
encouraging your people to bring their natural, human emotions into their work through the
ways they interact with customers and each other. The goal is to let customers see and feel
that you really care about each other, your products and services and the experiences they
have when doing business with you. If this is added to the preceding three stages, experience
indicates that this is where customer addiction is created. Customers become ‘hooked’ on
your level and style and never want to go anywhere else.

The challenges and opportunities of mapping and managing an effective Customer

Journey of Experience are:
Improved Customer Value
 Providing customers with more for the same or less
 Building or improving customer relationships.
 Increasing customer satisfaction
 Reducing hassle for customers.
 Making things quicker for customers
 Make things more consistent and/or reliable for customers
 Design of product/service to fit all customer needs
 Generally creating a better customer experience
Improved Employee Value
 Improving employee knowledge or skill
 Enhancing employee career opportunities
 Building employee relationships
 Building employee pride
 Strengthening employee confidence
 Enhancing employee job satisfaction
 Making work generally more enjoyable
Improved Business Value
 Growing sales
 Improving profits
 Reducing wastage/eliminate “ no value added” operations

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  Saving time
 Simplifying processes
 Reducing errors/variances
 Eliminating duplications
 Saving effort
 Improving supply assurance/incoming quality Increasing/conserving resources
 Enhancing business reputation - Generally being a better business and a better
neighbour

CEX Maturity Model

Arthur D. Little has worked with companies around the globe to determine their degree of
customer experience readiness, utilizing its CEX maturity model to assess development
within the organization and identify key practices that are required to improve maturity.
Little’s model comprises five degrees of maturity that an organization can reach over time in
a step-by-step, evolutionary process. What differentiates a mature organization from an
immature organization in terms of customer experience management?
In an immature organization, employees and management improvise customer experience
management programs on a project basis. Even if a customer-specific measurement has been
defined, it is not rigorously followed or enforced. The immature organization is reactionary,
and managers are usually focused on solving immediate crises. Priority is given to fixing the
basics, rather than achieving a level of outstanding excellence. A mature organization
possesses an organization-wide ability for managing customer experience on a continuous
basis.
In order to create superior customer experience, Little proposes a 3-step approach which
explains the why, what and how of CEX success:
1. Why: The first step is an analysis, during which the customer journey is defined for each
relevant customer segment. Issues across the journey and touch points are collected and root
causes on process and system level derived. In addition, expectations per customer segment
are collected. Thirdly, a customer experience ambition is defined, derived from the overall
brand attributes.
2. What: In the second phase, customer experience design principles are defined, such as
customer promises per touch point. A comprehensive roadmap of initiatives touching the

20
entire business system has to be set up as “it only works when it all works”. This roadmap
should be structured in three phases: fixing the basics, ensuring a predictive experience and
creating the wow effect. A major mindset change program is an integral part of this
transformation program. A detailed business case will be calculated.
3. How: Finally, an appropriate governance model is developed, as well as a KPI framework
reflecting the customer promises, as well as all internal steps to deliver these promises.
Customer experience targets will be reflected in incentive schemes. A focus on the
complexity, integrity and completeness of CEX
Customer experience management is complex; excellence needs to be tangible on all
customer touch points and many factors need to be considered. The road to excellence is long,
but it is a true differentiator.

CASES

The story of Yem and Arm: By M D Veglia,

Once upon a time, there were two men, who sold apples. One, who was called Yem was very
proud of his apples. In his Apple Heaven shop, he loved to put them in stacks of different
heights and shapes, he liked to mix different types of apples and different colors and smells,
so that his clients loved to stop at his little shop and have a delightful apple experience. The
other man, who was called Arm didn’t focus much on how his apples looked. In his Apple
Connection shop, he mostly left them in boxes or in huge stacks he kept in the warehouse on
the back. He never bothered to mix colors and type of apples. However, he knew his clients
by name and always offered them their preferred apples. It was a true apple relationship. Yem
and Arm were good friends; they didn’t feel themselves as competitors. “I that it’s important
how my apples look so they love to shop at my store” Yem used to tell his friend. “I think it’s
important to know what my clients like, so I give them the right apple when they need it”.
And the fact is, both had delighted clients. Clients of Yem, loved to look at the apples, loved
to weight a Stark in their hand in order to feel the “appleish” shape, or to smell a perfumed
Mcintosh, or occasionally to taste a Sayaka who Yem had sliced for clients to try. Clients of
Arm, on the contrary, didn’t bother that his shop looked not quite as interesting as the other
apple store. They simply loved that Arm knew their name, their preferred apples and that he
almost magically knew how to let them try new apples they usually liked. One day, in their

21
town, a huge Applemart opened. It stocked more apples than the two little shops combined:
in fact, more apples than Yem and Arm ever knew exist or have seen. They were apple
experts, but the guys at Applemart were experts too and they had the resources to find the
best apples in the World, and offer them at the best price to customers. No, they didn’t care
about displaying them artistic shapes or polish them or care about what apple their customers
liked. They didn’t know their customers at all, but they were great at moving huge quantity of
apples through their big Applemart store. Yem started complaining “Those guys don’t love
apples like I do. And my clients love apples like I do, they will keep coming”. Arm was more
concerned about the price of apples at Applemart, because sometimes they sell for less than
the price he could buy wholesale. However, he knew that their client took the time to
extablish a relationship with him, took the time to teach him about what they liked or disliked
so that he knew how to satisfy their apple needs. And, in fact, Arm clients kept coming
almost like the huge Applemart didn’t exist. He lost some clients, but they were the ones he
had seem rarely, the ones that didn’t like to try new apple flavors, the ones who liked also
pears, peaches and bananas. Yem clients kept coming too to his wonderful shop. That shop
was really a place to spend some time, at least for apple lovers. They still paid visits to the
shops, tasted the new apples on demo, weighted the Red Delicious and smelled the parfumed
Fuji. However, they started buying less. The experience was still tops, but they bought less.
Or worse: they enjoyed the experience at Apple Heaven and then bought at Applemart. On
the other hand, Arm started to offer an automatic apple replenishment service, so that
customers didn’t need even to go to his shop, they got the apple delivered automatically, with
the right type, quantity and
frequence. Customers loved that service and they spread the word. And word of mouth
reached Yem’s clients too, who didn’t like the rather basic Apple Connection store and used
to visit Apple Heaven. Slowly, some of Yem’s clients started migrating to Arm’s store and
word of mouth kept spreading about how great was to have the right apple when they wanted
it. Admittedly, sometimes all apple customers just shopped at Applemart, because it was
convenient, and it had great sales (they sold at a loss, but they would make it in volume).
Yem kept improving his store experience; he added books about apples, apple pies, apple
candies and even a trip to Appleland for real apple lovers. And some of his clients were really
delighted, but at the end of the day, while the experience was great, they have many other
things to do than visit Apple Heaven. Yem’s business was struggling. So, one day, Yem
approached Arm and asked if he wanted to buy his shop. He could so offer a true apple
experience to his customers, who appeared to be so loyal to Apple Connection. Arm saw the

22
deal, he always liked what Yem did just he liked more to focus on building a customer
relationship and database. But Arm knew that only Yem could be able to keep Apple Heaven
the true apple heaven it was, so he hired Yem as customer experience director for both shops.
Arms would have kept focusing on customer relationship and together the two would have
been a formidable competitor for much bigger Applemart. And so they did. And Arm’s Apple
Connection clients started enjoying the magic customer experience that Yem provided, while
Apple Heaven customers would enjoy the personalized service that made Arm successful.
The two shops were rechristened AppleLife and the last news we had is they are doing great,
expanding their chain through their country. Customer Experience is very important for
today’s sophisticated customers. But if you don’t develop a working Customer Relationship,
customer experience won’t help you compete with the price guys. Always remember you are
not in business to delight customers. You are in business to be delighted by them.

Questions
1. Using this case :
- differentiate customer service from customer experience
- Explain the main aspects of customer experience management

Virgin Airlines

Virgin needed to determine how cultural differences impacted on passengers’ perceptions of

their journeys on flights to Nigeria, China, Japan and India where customer satisfaction
scores lagged other routes. The airline wanted to ensure that all passengers, regardless of
cultural background, enjoyed a world-class experience with Virgin . Intersperience conducted
in-depth research into passengers’ experiences from check-in to arrival, using mixed
methodology including face-to-face interviews, diaries, in-flight observations and an online
survey. A multicultural and multi-lingual team accompanied passengers and crew on each
route, accurately identifying every cultural nuance affecting customer satisfaction. Delivering
superior customer service is in the DNA of the Virgin brand, underpinning Virgin Atlantic’s
status as one of the world’s most popular airlines. The airline has a simple mission statement:
“To grow a profitable airline where people love to fly and where people love to work.”
The Virgin Customer Experience Team has particular responsibility for ensuring that every
passenger, regardless of their cultural background, has a great experience. The Customer

23
Experience Team were aware that while overall customer satisfaction was high, there were
several routes where it lagged. Virgin decided to engage a consultancy to ascertain the extent
to which cultural issues affect passengers’ experiences and decided to focus on routes where
cultural differences were greatest.
Virgin needed a consultancy capable of tackling a complex multi-national project with a team
of native language researchers. It also required a consultancy with broad research capabilities
and techniques, a deep understanding of multi-cultural issues, and the ability to deliver
actionable insight within a challenging timeframe. Virgin decided that Intersperience fitted
the bill: “Intersperience had a very different model – an international skill base,
Multilanguage team, cultural insight and a strong existing knowledgeall of that and lay it on
top of the survey results, bringing a deeper level of interpretation to bear. The key thing was
Intersperience’s ability to explain the ‘why’ behind the ‘what’.” Intersperience worked with
Virgin to devise a wide-ranging study which included detailed research into the experiences
of passengers and ground and cabin crew on flights to Lagos, Shanghai, Tokyo and Delhi.
The mixed methodology project was designed to cover the entire customer experience from
check in to boarding procedures, safety briefings, in-flight entertainment, meals, and arrival
at the destination. Research techniques included face-to-face interviews with 160 passengers
and also 40 crew, as well as diaries, observations and an online survey. Intersperience
matched native speakers to routes, which meant that passengers and researchers had a
shared cultural heritage, allowing them to pick on cultural nuances. The brief was to
ascertain whether the current customer offering was sufficiently relevant and enjoyable, and
if not, where it fell short. Intersperience identified several cultural issues which had a
significant impact on satisfaction, including meal choices, in-flight entertainment, and the
presence of native language crew aboard planes as well as subtle differences affecting staff-
passenger communication including tone and volume of speech and body language. Virgin
said: “We found that apparently little
differences matter and we gained a new appreciation of how different cultures rate different
things...The research absolutely helped us secure resources to address the issues because it
was based on objective third party data which was respected enough to be taken seriously at
board level by Virgin.” Intersperience was able to place its findings within the context of its
unique ‘cultural lens’, an analytical approach which provides a framework against which it
can measure and compare culturally defined traits and behaviour. The research led to a
number of changes being introduced by Virgin including new cultural awareness training to
enable crews to deliver a more positive passenger experience as well as new in-flight menus

24
and entertainment offerings. Virgin also decided to recruit more native language crew on
certain routes and the airline is confident that the changes will deliver higher customer
satisfaction scores. Virgin said: “Our directors were all very supportive because it addressed
a performance issue for passengers and enabled us to make things better for them.” The
following immediate benefits were also realised
• Produced independent authoritative insight on passenger experience
• Helped secure board support for resources and service enhancements
• Resulted in new cultural awareness training for staff
• Identified requirement for changes in in-flight entertainment and menus
• Paved way for upturn in passenger satisfaction on targeted routes

Kingfisher airlines

It received the best New Airline of the Year Award given by Centre for Asia Pacific Aviation
for its significant innovation and outstanding customer experience. For the first time in the
Indian skies, Kingfisher Airlines offers world-class inflight entertainment with personal video
screens for every seat. There’s a wide selection of 5 video channels and 10 audio channels
available on- board. Also on offer are extra-wide seats and spacious legroom, delicious
gourmet meals, international-class cabin crew and a whole host of comforts and delights.
Kingfisher Airlines also facilitates doorstep delivery of tickets on guest request.

Blue Dart Express Limited, South

Asia’s largest integrated air express, courier and logistics company Their focus was on
providing customers with quality service and an enhanced customer experience, they
continued to upgrade and expand their infrastructure, by adding new facilities in Lucknow,
Mumbai, Pune, Ahmedabad, Meerut and Jaipur, and moving to a new, state-of-the- art
warehouse facility in Delhi.

Pizza hut
It recognises frequent callers and the context of their call enabling the customer to be routed
to the agent who can best fulfil their requirements, whether its a new order, changes to an
existing order or a status inquiry on an existing order. Pizza Hut operators can access up-to-

25
date information on its outlets in the catchment area, enabling them to select the Pizza Hut
store that can fulfil the customer order quickest, thereby meeting its commitment to deliver
hot pizza quickly.

Personalization: Ritz Carlton

Ritz-Carlton wows customers through personalization, based on motivated and well-trained
employees and the use of a distinguished global CRM system. For example, rooms are
personalized based on past requests without the need to ask for this service. Furthermore,
each employee is able to spend up to $2000 per incident for compensation without the need
for prior approval. For example poor service, such as forgotten laundry, can be compensated
for with a bottle of wine – not any bottle, but one that was ordered last in the restaurant. This
service dedication is trained every day; all staff attend a 15 minute daily “line-up”.

Controlling & Measurement: Telefonica UK

Telefonica UK has set up an extensive KPI framework covering all touch points. The
customer promises per touch point are translated into KPIs of how the customer shall
perceive this promise. In addition, all relevant internal activities are measured to assure that
delivery of these promises is on track. In a monthly update, every manager can review
specific issues. The subsequent discussion is all about solutions – not about fighting the
figures. Although all customer experience leaders show competitive advantages through
technology leadership, this leadership is rather a consequence of the relevant service
dimensions.

Everlasting Mindset Change: Southwest Airlines

Some benchmark organizations have managed to create customers who are fans by starting
with converting employees to fans, because only engaged employees can engage the
customers. Southwest Airlines is a well-known example of successful delivery of low-cost,
airline services that managed to differentiate by successfully creating a mindset and
organizational culture, which enabled the company to deliver superior Customer Experience.
Employees at Southwest feel that they work with friends in an enjoyable environment rather
than with colleagues. The leadership believes in empowering the employees, which further
inspires them to go to the extra mile in delivering Customer Experience.

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27
 CHAPTER THREE

MANAGERIAL ELEMENTS OF CEM

 What are the key CEM strategies

 What are the pre-requisite tools in Managing CE.
 Explain all the CEM winning implementation techniques
 Managing CEM in government

1.
Introduction
Managerial elements of customer experience management comprised of service quality
models, management of customer touch points, customer engagement, social media
management, service blueprint, service recovery, customer effort management, complaint
management, call centre management and others. The success to ultimate customer satisfaction
and retention is becoming a terrain in which employees, customers and management all emerge as
winners. Kumar (2008) poised that Customer experience is all encompassing with adoption and
understanding of customer satisfaction, customer lifetime value, and customer life cycle, voice of
customer, net promoter score and components of service quality as building blocks.
CEM winning implementation techniques
As with most things in business, your skill in implementation will be critical to your success.
Great leadership is an absolute requirement for success in any project. Leaders must lead by
publicly affirming their commitment to and regularly confirming their support for the project
goals. Worthwhile goals are necessary to unite a workforce. Improvement projects must
therefore be seen as focused on the things that will make employees proud of their work, their
workplace and their results.
All employee involvement or at least most employee involvement is necessary to create a
critical mass of committed people to carry the projects through any lean times.
Regular celebrations are essential to long-term success. You should always recognize and
reward any progress towards a goal as fervently as the ultimate achievement of it.
Winning momentum must be created through a pace of improvement that will put you streaks
ahead of your competitors and leave them demoralized and breathless attempting to keep up.

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Customer experience in retail stores/service centres

New and new shopping centres are being build and with them the numbers of retail stores are
rising for Telecoms, banks, groceries stores etc. With ever increasing competition, just
offering goods is not enough for those who want to excel. Stores that are putting significant
importance on differentiation are competing with unique product range supply, and/or
memorable in store design, and/or exceptionally well-trained personnel. All those elements
are positively affecting total customer experience. Terblanche and Boshoff (2001, see
Bagdare and Jain, 2013) defined retail customer experience as “all elements that encourage
or inhibit customers during their contact with a retailer.”
Retail CX is consisting of many elements, with various impact on the future loyalty. Some of
them occur even before customers walk into store, some occur when they are leaving the
store, but vast majority of the shopping experience happens inside the store.

”Customers engage themselves into a variety of activities while selecting a retail store,
shopping and post shopping stages, leading to a complete experience determining their
satisfaction levels and repeat visits.” Bagdare and Jain (2013). Bagdare and Jain (2013)
identified four main multidimensional factors influencing CX in retail stores:

Leisure, Joy, Distinctive and Mood.

Leisure: In today’s stressful world, people are searching for relaxing moments. As the study
shows, retailer’s ability to make shopping delightful, refreshing and relaxing has the highest
impact on final CX.
Joy: The second most influencing multidimensional factor in total retailing CX is represented
by seller’s ability to create satisfying, pleasurable and engaging experience.
Distinctive: The memorable design of the environment has significant impact on customer’s
perception. Differentiation is crucial. Elements influencing distinctive factor are uniqueness,
memorable and wonderful.

Mood: The customer can have different mood setting before entering the store, but
pleasurable experience in retail store positively improves it. Managing customer’s mood is
important as the mood influences the purchase intend. Unfortunately human mood is created
by interplay of various emotions, and managing mood of customer is a very complex task.

29
Mood is associated with following emotions: good, happy and excited. The mood setting of
people is, to certain extend, transferable, so positive mood of salesman can positively affect
customer’s mood. (Bagdare and Jain, 2013)

The great example of the exceptional retail CX are Apple Stores.

The environment of each store has delightful and refreshing atmosphere, with unique
architecture and premium location. The goal of well-trained personnel is not to sell as much
as possible (as they aren't on commission), but rather to satisfy and engage customer in every
possible way. Their job is to help and search for the best option for customer. - If your
computer has performance issues and only replacing a component will make it, they
recommend you to do so, rather than buy a new one. Anyway, Apple Stores are generating
more revenues per square meter than any other retailer on Earth (Dixon and Toman, 2013).
Customers can schedule the time they will come (for example for technical service) and they
will be served immediately. They don't need to wait in line for cashier, because every
employee is equipped with iPod with card-reader attachment, enabling to sell products
immediately, anywhere in the store. Dixon and Toman (2013) claim that the success of Apple
Stores is in the extremely low-effort experience.

The service touch points should aim for:

Minimizing the customer effort: Great design of store, or friendly atmosphere, are factors
strongly influencing customer’s experience, delivered by retailers going “the extra mile”. But
according to Dixon and Toman (2013), customers are increasingly demanding the low-effort
experience, which saves their time (and also prevents the negative impact on one’s mood).
The two most important elements of low-effort shopping are navigability and issue resolution.

Navigability; No one likes to spend too much extra time with searching for the product.
Companies should make the in-store product search as easy as possible, using the logic-based
categorization and encouraging stuff to actively help customers.

Issue resolution: Providing employees with the adequate training positively affects their
problem-solving performance. The ease of solving particular problem lowers customer effort
strongly.

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Customer experience in the online environment
The internet is evolving in a fast pace and online shopping is growing accordingly. The
online environment is changing. Only providing the option of buying online is not enough
anymore for all organisations. The growing competition is creating pressure on increasing
quality of service and ease of use. The best performing e-commerce stores are different from
the rest of the market. Their sites are usually more customer-oriented and their services
deliver higher value. Also, not all customers have the same value. Those who are loyal buy
more often, and are more important. Lee at al. (2009) identified customer satisfaction as the
most important factor influencing customer loyalty.

Types of online customers

Papas et al. (2014) divided customers into two groups, each with different satisfaction drivers:

Low-experienced users: Are customers with little to zero online shopping experience and
with low online shopping confidence. The most important factor influencing their satisfaction
is the ease of use of the website.

High-experienced users: Are more selective customers, with previous online shopping
experience. Their loyalty is influenced mainly by the website performance (including multi-
device optimization). According to research conducted by Chinho and Watcharee (2014), the
online shopping habits are another crucial factors with significant impact on repurchase
intentions. More often are customers buying from one specific online store, more effortless
the next shopping experience becomes. Therefore online retailers should focus on building
customer habits, using various promotions through website, emails or social media sites. The
customer experience leaders know that offering a low effort purchase process is a must-have,
but not enough. They go an extra mile, searching for ways to offer and sell the most relevant
products for each customer, the products that will ultimately make customer happy. Some
publishers disliked Amazon’s new approach, when it allowed customers to review a book
they read. They were afraid of negative reviews. But Jeff Bazos knew that this will help
customers to make a right purchase decision and eliminate the potential disappointment of
buying wrong or under-average product, especially if there are better for the same price.
Thanks to the informed purchase decision, customers not only save their money but also save
their time spent with the wrong product (Bean and Van Tyne, 2012).

31
CHAPTER FOUR

CUSTOMER EXPERIENCE: SUPPORTING

INGRIDIENTS

Customer engagement by customer care reps

Reps should demonstrate confidence and high, professional level of interaction throughout
the call. The tone of voice and pace of the customer’s speech should be matched, so the
customer’s personality can “govern” the call. Active listening and identification of
customers’ needs should be accompanied by the rep’s assurance that they clearly understand
known (and potential unknown) needs customers have. Reps should offer customers relevant,
available, options tailored for their needs. If there are multiple available options, reps should
provide customer with consultative recommendations. Next step is to provide customer with
the sufficiently detailed explanation, so the customer can make an informed decision. The
ideal case is if representative shows his high expertise in underlying matter, using words
tailored for customer’s level of technical terminology. In the last phase of interaction, rep
communicate all actions taken and/or ensure customer about solving their issue. Finally, rep
explains next steps that have to be undertaken clearly and in a way that shows customer
understanding with his situation. Strong rep support has the highest impact on
representatives’ performance, yet is the hardest to achieve. Without good environment, it will
be hard to achieve any of previously discussed goals. Dixon and Toman (2013) believe that
there are three conditions that have to be simultaneously met for the realization of maximum
peer support: The organization must provide an environment in which is normal that
colleagues are helping each other. This help should not be viewed as something extra, but as
a part of the job. It is highly likely that representatives share their ideas and experiences
during breaks (for example in smoking room), or outside the work. It is questionable if shared
ideas are positive or only tips how to “cheat system”. Therefore it is critical to encourage
employees to share the best and most beneficial ideas, or unique issues, never experienced
before.

32
To ensure the best practices sharing, some companies created systems enabling best practice
sharing among representatives. This might be special software or forum, not controlled by
management. Reps will be able to discuss basic problems without the need of asking
supervisor. Moreover, the best-performing reps will get the opportunity to take a greater
leadership role.

Service delivery

To understand Customer experience management one ought to understand service delivery.

Zeithaml, Parasumaran and Berry (1990) defined service encounter as all activities involved
in the service delivery process. Some service managers use the term "moment of truth" to
indicate that defining point in a specific service encounter where interactions are most intense
(Parasumaran, 1990). Jones (2009) also concurred on service encounter as moments of truth
but however he used the term “the magic moments”. This encounter is vital in building
customer experience and for this research will be the main centre stage and a building in
finding some answer to the research topic.

Customer Service
According to Turban et al. (2002) customer service is a series of activities designed to
enhance the level of customer satisfaction – that is, the feeling that a product or service has
met the customer expectation. Michael, Bailine, and Adam, (2004) coined customer service
as the provision of service to customers before, during and after a purchase. Its importance
varies by products, industry and customer. A customer service experience can change the
entire perception a customer has of the organization. Michael et al (2004) have argued that
the quality and level of customer service has decreased in recent years, and that this can be
attributed to a lack of support or understanding at the executive and middle management
levels of a corporation and/or a customer service policy. To address this argument, many
organizations have employed a variety of methods to improve their customer satisfaction
levels, and other KPIs (Turban et al, 2002). Customer service may be provided by a person
(e.g., sales and service representative), or by automated means for example Internet sites,
IVR etc. An advantage with automated means is an increased ability to provide service 24-7
hours a day, which can, at least, be a complement to customer service by persons. (Solomon
and Micah, 2010).

33
Customer life cycle management
Sterne and Cutler (2011)coined customer life cycle as a term used to describe the progression
of steps a customer goes through when considering, purchasing, using, and maintaining
loyalty to a product or service. They assert that effective customer lifecycle management
(CLM) can enable powerful customer interaction strategies that power significant business
growth and profitability. Marketing analysts Sterne and Cutler (2008) developed a matrix that
breaks the customer life cycle into five distinct steps: reach, acquisition, conversion,
retention, and loyalty. In layman's terms, this means getting a potential customer's attention,
making them aware of what you have to offer, turning them into a paying customer, and then
keeping them as a loyal customer whose satisfaction with the product or service urges other
customers to join the cycle. The customer life cycle is often depicted by an ellipse,
representing the fact that customer retention truly is a cycle and the goal of effective CRM
and customer experience strategies is to get the customer to move through the cycle again and
again. An understanding of customer lifecycle is vital in building advocacy and customer
experience.

Customer Life Cycle –Adopted from (Jones; 2012)

Customer Satisfaction
Parker and Mathew (2001) expressed that there are two basic definitional approaches of the
concept of customer satisfaction. The first approach defines satisfaction as a process and the
second approach defines satisfaction as an outcome of a consumption experience. These two

34
approaches are complementary, as often one depends on the other. Customer satisfaction as a
process is defined as an evaluation between what was received and what was expected
Oliver, (1981); Olson and Dover, (1979), Tse and Wilton, (1988), emphasizing the
perceptual, evaluative and psychological processes that contribute to customer satisfaction
(Vavra, 1997, p. 4). Parker and Mathews (2001) however noted that the process of
satisfaction definitions concentrates on the antecedents to satisfaction rather than satisfaction
itself. Satisfaction as a process is the most widely adopted description of customer
satisfaction and a lot of research efforts have been directed at understanding the process
approach of satisfaction evaluations (Parker and Mathews, 2001). Yi (1990) expressed that
customers buy products or services with pre-purchase expectations about anticipated
performance, once the bought product or service has been used, outcomes are compared
against expectations. If the outcome matches expectations, the result is confirmation. When
there are differences between expectations and outcomes, disconfirmation occurs. Positive
disconfirmation occurs when product or service performance exceeds expectations.
Therefore, satisfaction is caused by positive disconfirmation or confirmation of customer
expectations, and dissatisfaction is the negative disconfirmation of customer expectations (Yi,
1990).
Satisfaction is “the cognitive state of the buyer about the appropriateness or inappropriateness
of the reward received in exchange for the service experienced (Howard and Seth, 1969, pp.
145); the evaluation of emotions (Hunt, 1977, p. 460); the favorability of the individual's
subjective evaluation (Westbrook, 1980, p. 49); a positive outcome from the outlay of scarce
resources (Bearden and Teel, 1983a, p. 21); an overall customer attitude towards a service
provider (Levesque and McDougall, 1996, pp.14); is a judgment that a product or service
feature, or the product or service itself, provided (or is providing) a pleasurable level of
consumption-related fulfillment, included levels of under- or over fulfillment (Oliver,1997, p.
13); is an experience-based assessment made by the customer of how far his own
expectations about the individual characteristics or the overall functionality of the services
obtained from the provider have been fulfilled (Homburg and Bruhn, 1998); the fulfillment of
some need, goal or desire (Oliver, 1999); an emotional reaction to the difference between
what customers anticipate and what they receive (Zineldin, 2000); is based on a customer’s
estimated experience of the extent to which a provider’s services fulfill his or her
expectations (Gerpott et al. 2001)”.
For this study, customer satisfaction definition used is that of Homburg and Bruhn (1998)
which is “an experience-based assessment made by the customer of how far his own

35
expectations about the individual characteristics or the overall functionality of the services
obtained from the provider have been fulfilled”. The relevance of this definition to this study
is that it indicates that customers assess the mobile services based on experience of use and
the rating is done in accordance with the mobile services attributes.

Customer loyalty

Fornier, (1994) defines customer loyalty as an attitude which indicates an individual’s overall
attachment to a product, service, or brand. Jones and Sasser (1995) have also found customer
satisfaction as the key element in securing customer loyalty. Coyne (1989) stated that
customer satisfaction has measurable impact on customer loyalty in that when satisfaction
reaches a certain level; on the high side, loyalty increases dramatically; at the same time,
when satisfaction falls to a certain point, loyalty reduces equally dramatically. Yi (1990)
expressed that the impact of customer satisfaction on customer loyalty by stating that
“customer satisfaction influences purchase intentions as well as post-purchase attitude”. In
other word, satisfaction is related to behavioral loyalty, which includes continuing purchases
from the same company, word of mouth recommendation, and increased scope of
relationship. Fornell (1992) found out that there is a positive relationship between customer
satisfaction and customer loyalty but this connection is not always a linear relation. This
relationship depends on factors such as market regulation, switching costs, brand equity,
existence of loyalty programs, proprietary technology, and product differentiation at the
industry level.
Jones and Sasser (1995) proposed that link between satisfaction and loyalty can be classified
into four different groups: loyalist/apostle (high satisfaction, high loyalty), defector/ terrorist
(low satisfaction, low loyalty), mercenary (high satisfaction, low loyalty), and hostage (low
satisfaction, high loyalty). Roger Hallowell (1996) confirmed the link between customer
loyalty (in the context of behavioural loyalty) and customer satisfaction. Oliver (1999) stated
that the relationship between satisfaction and loyalty is that satisfaction is transformed into
loyalty with the assistance of a myriad of other factors. However, this relationship is complex
and asymmetric. High levels of satisfaction lead to high levels of attitudinal loyalty.
Attitudinal loyalty involves different feelings, which create a customer’s overall attachment
to a product, service, or company (Lovelock et al., 2001). Gerpott et al. (2001) in their study
of the German mobile telecommunication found that customer loyalty is positively related to

36
customer experience, and both factors are important parameters in the mobile
telecommunications industry. Turel and Serenko, 2006, in their study of Canadian mobile
telecommunications also confirmed these finding. These three groups are: (1) loyalty as
repeat purchase and word of mouth behaviour (Liljander and Strandvik, 1993), (2) loyalty as
a combined composite of repeat patronage and attitudinal component (Dick and Basu, 1994),
and (3) a psychological prospect of loyalty (Czepiel, 1990). In this study, customer loyalty is
defined as customer word of mouth (WOM) behaviour. Jones and Sasser (1995) discuss that
WOM is one of the most important factors in acquiring new customers.

Customer retention
Several research works have shown that there is positive relationship between customer
satisfaction and customer retention, customer satisfaction has a direct effect on customer
retention (Rust and Subramaman, 1992). Anderson and Sullivan, (1993) added that customer
satisfaction is positively related to customer retention. Satisfied customer is more likely to
return and stay with a company than a dissatisfied customer who can decide to go elsewhere
(Ovenden, 1995); satisfaction leads to retention and the retention is not simply because of
habit, indifference or inertia (Desai and Mahajan, 1998); customer retention is central to the
development of business relationships, and these relationships depend on satisfaction
(Eriksson and Vaghult, 2000); customer satisfaction is positively related to customer
retention and the effect varies by customer size and the customer’s current level of
satisfaction (Niraj et al., 2003). Since 1990s the subject of customer satisfaction and
customer retention, and their relationship with company‟s financial performance has become
the core of attention for many managers. By interpreting customer behaviours like retention
to profit, firms move closer to the interdependent variable profitability (Reichheld and Sasser,
1990; Reichheld et al., 2000). Retention and defection are like two sides of the same coin.

Retention Rate
Retention rate can be defined as the average likelihood that a customer repurchases
product/service from the same firm. The defection or churning rate is defined as the average
likelihood that a customer switches or defects from the company to another company.
Lowering customer switching rates can be profitable to companies. Research confirms that
retaining customers is a more profitable strategy than acquisition of new customers (Fornell
and Wernerfelt, 1987 and 1988). Reichheld and Sasser (1990, p. 111)) put emphasis on zero

37
customer detections (churning) as an overall performance. “Ultimately, defections should be
a key performance measure for senior management and a fundamental component of
incentive systems. Managers should know the company’s defection rate, what happens to
profits when the rate moves up or down, and why defections occur.” The financial impact of
customer retention assessed based on two assumptions. First, acquiring new customers is
more expensive than retaining existing customers as it involves advertising, promotion and
start-up operating expenses (Anderson and Sullivan, 1990; Reichheld and Sasser 1990). New
customers, therefore, are more likely to be unprofitable for a period of time after acquisition.
Second, existing customers are more likely to generate more profit to companies through
cross-selling and word-of-mouth. A study from Rose (1990) reveals that a customer that
retain with company minimum 10 years is on average three times more profitable than a
customer with 5 years customer history.

Utilising Customer Retention for experience management

However, the appropriate interval over which retention rate should be measured is not always
one year. Rather, it depends on the customer repurchase cycle. Car insurance and magazine
subscriptions are bought on an annual basis. Carpet tiles and hi-fi’s are not. If the normal hi-fi
replacement cycle is four years, then retention rate is more meaningful if it is measured over
four years instead of twelve months. Additional complexity is added when companies sell a
range of products and services, each with different repurchase cycles. Automobile dealers
might sell cars, parts, fuel and service to a single customer. These products have different
repurchase cycles which make it very difficult for the dealer to have a whole of customer
perspective on retention. Sometimes companies are not clear about whether an individual
customer has defected. This is because of the location of customer related data, which might
be retained in product silos, channel silos or functional silos.

● Product silos: consider personal insurance. Insurance companies often have product-based
information systems. Effectively, they regard an insurance policy as a customer. If the policy
is renewed, the customer is regarded as retained. However, take a customer who shops
around for a better price and, after the policy has expired, returns to the original insurer. The
insurer may take the new policy to mean a new customer has been gained, and an old
customer has churned. They would be wrong.

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● Channel silos: in the B2B context, independent office equipment dealers have formed into
cooperative buying groups to purchase goods at lower prices and benefit from other
economies of scale in marketing. When a dealer stops buying direct from MTN and joins
Vodacom, MTN’s customer data may report a defection, but all that has happened is that the
dealer has begun to buy through a different channel. Telecommunications companies acquire
customers through many channels. Consider a customer who buys a 12 month mobile phone
contract from a Vodafone-owned retail outlet. Part way through the year Vodafone launches a
new pay-as-you-go product with no contractual obligation. The customer allows her current
contract to expire and then buys the new pay-as you-go product, not from a Vodafone outlet
but from a supermarket.

● Functional silos: customer-related data are often kept in functional silos that are not
integrated to provide a whole of customer perspective. A customer might not have made a
product purchase for several years, and is therefore regarded as a churned customer on the
sales database. However, the same customer might have several open queries or issues on the
customer service database, and is therefore regarded as still active. The use of aggregates and
averages in calculating customer retention rates can mask a true understanding of retention
and defection. This is because customers differ in their sales, costs-to-serve and buying
behaviours. It is not unusual for a small number of customers to account for a large
proportion of company revenue. If you have 100 customers and lose ten in the course of a
year, your raw defection rate is 10 per cent. But what if these customers account for 25 per
cent your company’s sales? Is the true defection rate 25 per cent? Consideration of profit
makes the computation even more complex. If the 10 per cent of customers that defected
produce 50 per cent of your company’s profits, is the true defection rate 50 per cent? What
happens if the 10 per cent of lost customers are at the other end of the sales and profit
spectrum? In other words what if they buy very little and/or have a high cost-to-serve? It
could be that they contribute less than 5 per cent to sales and actually generate a negative
profit, i.e. they cost more to serve than they generate in margin. The loss of some customers
might improve the company’s profit performance. It is not inconceivable that a company
could retain 90 per cent of its customers, 95 per cent of its sales and 105 per cent of its profit!

A solution to this problem is to consider three measures of customer retention:

39
1. Raw customer retention rate: this is the number of customers doing business with a firm at
the end of a trading period, expressed as percentage of those who were active customers at
the beginning of the period.
2. Sales-adjusted retention rate: this is the value of sales achieved from the retained
customers, expressed as a percentage of the sales achieved from all customers who were
active at the beginning of the period.
3. Profit-adjusted retention rate: this is the profit earned from the retained customers,
expressed as a percentage of the profit earned from all customers who were active at the
beginning of the period. A high raw customer retention rate does not always signal excellent
customer retention performance. This is because customer defection rates vary across cohorts
of customers. Defection rates tend to be much higher for newer customers than longer tenure
customers. Over time, as seller and buyer demonstrate commitment, trust grows and it
becomes progressively more difficult to break the relationship.

Customer delight
It is very difficult to build long-term relationships with customers if their needs and
expectations are not understood and well met. It is a fundamental precept of modern customer
management that companies should understand customers, and then acquire and deploy
resources to ensure their satisfaction and retention. This is why CRM is grounded on detailed
customer-related knowledge. Customers that you are not able to serve well may be better
served by your competitors. Delighting customers, or exceeding customer expectations,
means going beyond what would normally satisfy the customer. This does not necessarily
mean being world-class or best-in-class. It does mean being aware of what it usually takes to
satisfy the customer and what it might take to delight or pleasantly surprise the customer.
You cannot really strategize to delight the customer if you do not understand the customer’s
fundamental expectations. You may stumble onto attributes of your performance that do
delight the customer, but you cannot consistently expect to do so unless you have deep
customer insight. Consistent efforts to delight customers show your commitment to the
relationship. Commitment builds trust. Trust begets relationship longevity. Customer delight
occurs when the customer’s perception of their experience of doing business with you
exceeds their expectation.
In formulaic terms:

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CD _ P > E
where CD _ customer delight,
P _ perception
E _ expectation.
This formula implies that customer delight can be influenced in two ways: by managing
expectations or by managing performance. In most commercial contexts customer
expectations exceed customer perceptions of performance. In other words, customers can
generally find cause for dissatisfaction. You might think that this would encourage
companies to attempt to manage customer expectations down to levels that can be delivered.
However, competitors may well be improving their performance in an attempt to meet
customer expectations. If your strategy is to manage expectations down, you may well lose
customers to the better performing company. This is particularly likely if you fail to meet
customer expectations on important attributes. Customers have expectations of many
attributes, for example product quality, service responsiveness, price stability and the
physical appearance of your people and vehicles. These are unlikely to be equally important.
It is critical to meet customer expectations on attributes that are important to the customer.
Online customers, for example, look for rapid and accurate order fulfilment, good price, high
levels of customer service and website functionality. Online retailers must meet these basic
requirements. Dell Computers believes that customer retention is the outcome of their
performance against three variables: order fulfilment (on-time, in full, no error (OTIFNE)),
product performance. Econet Wireless Global believes customer retention is on its strong
brand and vision of the founder which resonates with many of the African populace.

A number of companies have adopted ‘Customer Delight’ as their mission, including Cisco,
American Express and Kwik Fit, the auto service chain. Others pay homage to the goal but do
not organize to achieve it. In the service industries, customer delight requires frontline
employees to be trained, empowered and rewarded for doing what it takes to delight
customers. It is in the interaction with customers that contact employees have the opportunity
to understand and exceed their expectations. The service quality attributes of empathy and
responsiveness are on show when employees successfully delight customers.

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Loyalty schemes
Loyalty schemes reward customers for their patronage. Loyalty schemes or programmes can
be defined as follows: A loyalty programme is a scheme that offers delayed or immediate
incremental rewards to customers for their cumulative patronage. The more a customer
spends, the higher the reward. Loyalty schemes have a long history. In 1844, in the UK, the
Rochdale Pioneers developed a cooperative retailing operation that distributed surpluses back
to members in the form of a dividend. The surpluses were proportionate to customer spend. S
& H Pink Stamps and Green Shield stamps were collected in the 1950s and 1960s, and
redeemed for gifts selected from catalogues. In the 1970s, Southwest Airlines ran a
‘Sweetheart Stamps’ programme that enabled travellers to collect proofs of purchase and
surrender them for a free flight for their partner. Today’s CRM-enabled loyalty schemes owe
their structure to the frequent flier programmes (FFP) that started with American Airlines ’
Advantage programme in 1981. The airline made a strategic decision to use its spare capacity
as a resource to generate customer loyalty. Airlines are high fixed-cost businesses. Costs do
not change much, regardless of whether the load factor is 25 per cent or 95 per cent.
American knew that filling the empty seats would have little impact on costs, but could
impact significantly on future demand. The airline searched its reservation system. This basic
model has migrated from airlines into many other B2C sectors: hotels, restaurants, retail, car
hire, gas stations and bookstores.

Loyalty programme at Boots the Chemist

Boots the Chemist is the UK’s leading health and beauty retailer. Ninety per cent of the UKs
60 million plus population visits a Boots store at least once a year. The company has an
annual turnover of around £3 billion from a network of some 1500 stores in the UK and Irish
Republic. Boots launched their CRM strategy in 1999. It was built around the ‘ Advantage
Card ’ , a loyalty programme enabled by a chip-embedded smart card. The standard reward
for purchases is four points for every £1 spent, equivalent to a 4 per cent discount or rebate.
This is a very generous rate of reward compared to the other retail sectors, where the major
supermarket loyalty schemes represent a 1 per cent saving for customers. After an initial
investment in excess of £30 million, the programme has become the third largest retail
loyalty scheme in the UK. Boots reported that it took three years to achieve the programme’s
revenue objectives, and there have been many other benefits such as higher levels of

42
customer retention, increased in-store spending and overall increased profitability. Critics
claim that schemes have become less distinctive and value-adding as many competitors now
operate me-too programmes. Indeed, it is very hard to find any hotel chain that does not have
a loyalty programme. Customers now expect to accumulate credits as part of the standard
hotel value proposition. Many UK supermarket shoppers carry loyalty cards from more than
one supermarket. The customer’s choice set when grocery shopping might include all
suppliers with whom they have a card-based relationship. One major concern is that loyalty
schemes may not be creating loyalty at all. Loyalty takes two forms: attitudinal and
behavioural loyalty.
Attitudinal loyalty is reflected in positive affect towards the brand or supplier. Behavioural
loyalty is reflected in purchasing behaviour. There is very little longitudinal evidence about
shifts in customer behaviours after joining a loyalty scheme. One retailing study, however,
using longitudinal data from a convenience store franchise, found that shoppers who were
heavy buyers at the beginning of a loyalty programme did not change their patronage
behaviour after joining. However, shoppers whose initial patronage levels were low or
moderate gradually became more behaviourally loyal to the firm, increasing their shopping
spend at the franchise. For light buyers, the loyalty programme encouraged shoppers to buy
from additional categories, thus deepening their relationship with the franchise. Whether or
not they develop loyalty, these schemes certainly reward buying behaviour. Accumulated
credits represent investments that the customer has made in the scheme or the brands behind
the scheme. When customers get no return from this investment, they can be deeply
distressed. Loyalty schemes are successful enablers of customer insight. Personalized cards
are obtained only after registering personal data. Then it becomes possible to monitor
transactional behaviour. Chip embedded smart cards carry the information on the card itself.
A huge a non-essential ‘indulgent’ item.

Customer clubs
Customer clubs have been established by many organizations. A customer club can be
defined as follows: “A customer club is a company-run membership organization that
offers a range of value-adding benefits exclusively to members.”

The initial costs of establishing a club can be quite high, but thereafter most clubs are
expected to cover their operating expenses and, preferably, return a profit. Research suggests
that customer clubs are successful at promoting customer retention. To become a member and

43
obtain benefits, clubs require customers to register. With these personal details, the company
is able to begin interaction with customers, learn more about them, and develop offers and
services for them. Clubs can only succeed if members experience benefits they value. Club
managers can assemble and offer a range of value-adding services and products that, given
the availability of customer data, can be personalized to segment or individual level. Among
the more common benefits of club membership are access to member only products and
services, alerts about upcoming new and improved products, discounts, magazines and
special offers. There are ‘several hundred’ throughout the world.

Sales promotions
Whereas loyalty schemes and clubs are relatively durable, sales promotions offer only
temporary enhancements to customer value. Sales promotions, as we saw in the last chapter
can also be used for customer acquisition. Retention-oriented sales promotions encourage the
customer to repeat purchase, so the form they take is different. Here are some examples.
● In-pack or on-pack voucher: customers buy the product and receive a voucher entitling
them to a discount off one or more additional purchases.
● Rebate or cash back: rebates are refunds that the customer receives after purchase. The
value of the rebate can be adjusted in line with the quantity purchased, in order to reward
customers who meet high volume targets.
● Patronage awards: customers collect proofs of purchase, such as store receipts or barcodes
from packaging, which are surrendered for cash or gifts. The greater the volume purchased
the bigger the award.
● Free premium for continuous purchase: the customer collects several proofs of purchase
and mails them in, or surrenders them at retail outlets to obtain a free gift. Sometimes the gift
might be part of a collectable series. For example, a manufacturer of preserves and jams
developed a range of collectable enamel badges. Customers collected proofs of purchase and
mailed them in to receive a badge. There were 20 different badges in the series. This
promotion was so popular that a secondary market was established so that collectors could
trade and swap badges to obtain the full set.
● Collection schemes: these are long-running schemes where the customer collects items
with every purchase. Kellogg’s ran a promotion in which they inserted picture cards of
carefully chosen sports stars into packets of cereals. Customers didn’t know which card they
had until they bought and opened the pack. These became collectable items.

44
● Self-liquidating premium: a self-liquidating promotion is one that recovers its own direct
costs. Typically, consumers are invited to collect proofs of purchase, and mail them in with a
personal cheque or money order. This entitles the customer to buy a product at a discounted
premium, such as a camera or gardening equipment. The promoter will have reached a deal
with the suppliers of the products to buy in bulk at a highly discounted rate, perhaps on a sale
or return basis. Margins earned from the sale of product, plus the value of the cheque or
money order cover the costs of running the promotion which, as a consequence, becomes
self-liquidating.

Bonding
The next positive customer retention strategy is customer bonding. B2B researchers have
identified many different forms of bond between customers and suppliers. These include
interpersonal bonds, technology bonds (as in EDI), legal bonds and process bonds. These
different forms can be split into two major categories: social and structural.
Social bonds: Social bonds are found in positive interpersonal relationships between people
on both sides of the customer-supplier dyad. Positive interpersonal relationships are
characterized by high levels of trust and commitment. Successful interpersonal relationships
may take time to evolve, as uncertainty and distance are reduced. As the number of episodes
linking customer and supplier grow, there is greater opportunity for social bonds to develop.
Suppliers should understand that if they act opportunistically or fail to align themselves to
customer preferences, trust and confidence will be eroded. Strong social bonds can emerge
between employees in companies having similar sizes, cultures and locations. For example,
small and medium-sized businesses generally prefer to do business with similar sized
companies, and Japanese companies prefer to do business with other Japanese companies.
Geographic bonds emerge when companies in a trading area cooperate to support each other.
Social relationships between buyer and seller can be single or multilevel.
A single-level relationship might exist between the supplier’s account manager and the
customer’s procurement officer. The more interpersonal links there are between the dyad, the
more resistant the relationship is to breakdown. For example, technical, quality and
operations people talk to their equivalents on the other side. Social bonds characterized by
trust generally precede the development of structural bonds. Mutual investments in business
relationships serve as structural bonds. These structural bonds can be formally recognized in
an alliance or joint venture having legal status. Companies are unlikely to commit resources
if there is a low level of trust in the partner’s integrity and competence.

45
Structural bonds: Structural bonds are established when companies and customers commit
resources to a relationship. Generally, these resources yield mutual benefits for the
participants. For example, a joint customer-supplier quality team can work improving quality
compliance, benefiting both companies. Resources committed to a relationship may or may
not be recoverable if the relationship breaks down. For example, investments made in
training a customer’s operatives are non-returnable. On the other hand, a chilled products
manufacturer that has installed refrigerated space at a distributor’s warehouse may be able to
dismantle and retrieve it if the relationship dissolves.
A key feature of structural bonding is investment in adaptations to suit the other party.
Suppliers can adapt any element of the offer – product, process, price and inventory levels,
for example – to suit the customer. Customers, on the other hand, also make adaptations. For
example, they can adapt their manufacturing processes to accommodate a supplier’s product
or technology. Power imbalances in relationships can produce asymmetric adaptations. A
major multiple retailer might force adaptations from small suppliers, while making no
concessions itself. For example, it could insist on a reduction in product costs, co-branding of
point-of-sale material, or even attempt to coerce the supplier not to supply competitors.
Highly engaged customers are more involved with your brand or company. This not only
implies frequent purchasing, but also other attributes of what might be called ‘corporate
citizenship’, such as being an unpaid advocate by uttering positive word-of-mouth, providing
frequent feedback on their experiences, participating in company research, contributing to
new product or service development, being more forgiving if the company makes a mistake
or service fails, and participating in online communities and user groups. The outcome of
higher levels of engagement, it is claimed, is a more durable customer relationship. One
report, for example, indicates that the rate of account closures at a bank were 37 per cent
lower for emotionally engaged customers than for rationally satisfied customers.

Context makes a difference to customer retention in two ways. First, there are some
circumstances when customer acquisition makes more, indeed the only, sense as a strategic
goal. Secondly, customer retention strategies will vary according to the environment in which
the company competes. When launching a new product or opening up a new market a
company’s focus has to be on customer acquisition. In contexts where there are one-off
purchases such as funerals, infrequent purchases such as heart surgery, or unique conditions
such as gave rise to the demand for Y2K compliance software, customer retention is

46
subordinate to acquisition. The impact of contextual conditions on the choice and timing of
customer retention practices has not been thoroughly researched. However, we can see that a
number of contextual considerations impact on customer retention practices:
● Number of competitors: in some industries there is a notable lack of competitors, meaning
that companies do not suffer badly from customer churn. This typically applies in state-
provided services such as education and utilities such as gas, electricity, rail and
telecommunications, whether deregulated or not. When customers are dissatisfied they have
no competitor to turn to. They may also believe that the competitors in the market are not
truly differentiated by their service standards. In other words, each supplier is as bad as the
others. The result is inertia.
● Corporate culture: in corporate banking, the short-term profit requirement of both
management and shareholders has resulted in a lack of genuine commitment to relationship
banking. Banks have been very opportunistic in their preference for transactional credit-based
relationships with customers.
● Channel configuration: sellers may not have the opportunity to maintain direct
relationships with the ultimate buyers and users of their products. Instead, they may rely on
their intermediaries. Caterpillar, for example, does not have a relationship with the
contractors who use their equipment. Instead, it works in partnership with about 1500
independent dealers around the world to provide customer service, training, field support and
inventories of spare parts.
● Purchasing practices: the purchasing procedures adopted by buyers can also make the
practice of customer retention futile. Customers do not always want relationships with their
suppliers. For example, towards the end of the 1990s, government departments in the UK and
elsewhere adopted compulsory competitive tendering (CCT) as their mechanism for making
purchasing decisions. The process is designed to prevent corrupt relationships developing and
to ensure that tax-payers get good value for money, i.e. pay a low price for the services
rendered. Every year or so, current suppliers and other vendors are invited to pitch for the
business. Price is often the primary consideration for the choice of supplier.
● Ownership expectations: the demands of business owners can subordinate customer
retention to other goals. For example, Korean office equipment manufacturers are very
focused on sales volumes. They require their wholly-owned overseas distributors to buy
quotas of product from Korea and sell them in the served market, regardless of whether the
products are well-matched to local market conditions and customer requirements. The

47
distributors are put in a position of having to create demand against competitors that do a
better job of understanding and meeting customer requirements.
● Ethical concerns: public sector medical service providers cannot simply focus on their
most profitable customers or products. This would result in the neglect of some patients and a
failure to address other areas of disease management. Private sector providers do not
necessarily face this problem.

The role of research

Companies can reduce levels of customer churn by researching a number of questions:
1. Why are customers churning?
2. Are there any lead indicators of impending defection?
3. What can be done to address the root causes?

The first question can be answered by contacting and investigating a sample of former
customers to find out why they took their business elsewhere. Customers defect for all sort of
reasons, not all of which can be foreseen, prevented or managed by a company. For example,
Susan Keaveney identified eight causes of switching behaviours in service industries
generally: price, inconvenience, core service failures, failed employee responses to service
failure, ethical problems, involuntary factors, competitive issues and service encounter
failures. Only six of these eight causes of switching behaviours can be influenced by the
service provider.

Another industry-specific study found that between 20 per cent and 25 per cent of
supermarket shoppers changed their primary store in a 12 month period. Twenty-four per cent
of switchers changed allegiance because a new competitive store had opened per cent
because they had moved house, 11 per cent for better quality and 10 per cent for better
choice. The second question attempts to find out if customers give any early warning signals
of impending defection. If these were identified the company could take pre-emptive action.
Signals might include the following:
● reduced RFM scores (recency–frequency–monetary value)
● Non-response to a carefully targeted offer
● reduced levels of customer satisfaction
● Dissatisfaction with complaint handling

48
● reduced share of customer (e.g. customer only flies one leg of an international flight on
your airline)
● inbound calls for technical or product-related information
● Late payment of an invoice
● querying an invoice
● Customer touch points are changed, e.g. store closes, change of website address
● Customer change of address.

Customer researchers are also advised to analyse the reasons for customer defection, and to
identify the root causes. Sometimes these can be remedied by management. For example, if
you lose customers because of the time taken to deal with a complaint, management can audit
and overhaul the complaints management process. This might involve identifying the
channels and touch points through which complaints enter the business, updating complaints
database management, or training and empowering frontline staff. Root causes can be
analysed by customer.

Customer development is the process of growing the value of retained customers. Companies
generally attempt to cross-sell and up-sell products into the customer base while still having
regard for the satisfaction of the customer. Cross-selling, which aims to grow share of wallet
can be defined as follows:
Cross-selling is selling additional products and services to an existing customer.
Up-selling can be defined as follows: Up-selling is selling higher priced or higher margin
products and services to an existing customer. Customers generally do not respond positively
to persistent and repeated efforts to sell additional products and services that are not related to
their requirements. Indeed, there is an argument that companies should seek to down-sell
where appropriate. This means identifying and providing lower cost solutions to the
customers ’ problems, even if it means making a lower margin. Customers may regard up-
selling as opportunistic and exploitative, thereby reducing the level of trust they have in the
supplier, and putting the relationship at risk. However, multi-product ownership creates a
structural bond that decreases the risk of relationship dissolution. There are a number of
CRM technologies that are useful for customer development purposes.
● Campaign management software is used to create up-sell and crosssell customer
development campaigns and track their effectiveness, particularly in terms of sales and
incremental margin.

49
● Event-based marketing: campaigns are often associated with events. For example, a bank
will offer a customer an investment product if deposits in a savings account reach a trigger
point.
● Data mining: offers are based on intelligent data mining. Transactional histories record
what customers have already bought. Data mining can tell you the probability of a customer
buying any other products (propensity to buy), based on their transactional history or
demographic/psychographic profile. First direct, the Internet and telephone bank, uses
propensity to buy scores to run targeted, event driven cross-sell campaigns through direct
mail and call centres. They aim at high conversion rates through follow-up calls.
● Customization: offers are customized at segment or unique customer level. Also
personalized is the communication to the customer and the channel of communication: e-
mail, surface mail, SMS or phone call, for example.
● Channel integration: customer development activities are integrated across channels. It is
regarded as bad customer management practice to have different channels making different
offers to the same customer. In retail, channel integration is observed when channels such as
stores, web and direct to consumer channels act in an integrated, customer-centric manner.
For this to happen, customer information and customer development plans need to be shared
across channels.
● Integrated customer communications: the messages communicated to customers are
consistent across all channels.
● Marketing optimization: optimization software is available from CRM analytics
organizations such as SAS. Optimization enables marketers to enjoy optimal returns from up-
sell and cross-sell campaigns across multiple channels and customer segments, taking
account of issues such as budget constraints, communication costs, contact policies (e.g. no
more than two offers to be communicated to any customer in any quarter), customers ’
transactional histories and propensities to buy.
In professional services, the client audit is often the foundation for cross-selling and up-
selling of clients. In B2B environments, sales representatives need to be alert to opportunities
for cross- and upselling.
This means understanding customers’ manufacturing processes, and knowing their product
innovation plans. In mature markets, where customer acquisition is difficult or expensive, the
development of retained customers is an important source of additional revenues. For
example, in the mature mobile telecommunications market, the penetration of handsets is at a
very high level. Winning new-to-market customers is regarded as too difficult, since these are

50
the laggards and expensive to convert. Network operators have begun to focus on selling
additional services to their existing customer bases, including data applications. Strategies for
terminating customer relationships Companies rarely hesitate to terminate employee positions
that serve no useful purpose. In a similar vein, a review of customer value might identify
customers that are candidates for dismissal, including customers who will never be profitable
or who serve no other useful strategic purpose. More specifically, these include fraudsters,
persistent late payers, and serial complainants, those who are capricious and change their
minds with cost consequences for the supplier, and switchers who are constantly searching
for a better deal. This certainly happens in reverse; customers sack suppliers when they
switch vendors. Relationships dissolve when one partner no longer views the relationship as
worth continuing investment. In a B2B context, activity links, resource ties and actor bonds
would be severed. However, even if there is no strategic value in a customer, dissolution of
the relationship is not always an attractive option because of contractual obligations,
expectations of mutuality, word-of-mouth risks and network relationships.
McKinsey reports that 30 to 40 per cent of a typical company’s revenues are generated by
customers who, on a fully costed, standalone, basis would be unprofitable. It is therefore
important to conduct regular reviews of the customer base to identify potential candidates for
dismissal. If this is not done sales, marketing and service resources will continue to be sub
optimally deployed. Nypro, a large plastic injection moulder, had 800 customers and sales of
$50 million in 1987 when it decided to move out of low value-add manufacturing. Many of
these customers served no useful strategic purpose and, by 1997, the company had only 65
customers, all of whom were large and required value added solutions rather than cheap
moulded products. However, sales revenues were $450 million. Sacking customers’ needs to
be conducted with sensitivity. Customers may be well connected and spread negative word-
of-mouth about their treatment. In the year 2000, UK banks began a programme of branch
closures in geographic areas that were unprofitable. Effectively, they were sacking low-value
customers in working-class and rural areas.
There was considerable bad publicity, the government intervened and the closure strategy
was reviewed.

There are a number of strategies for sacking customers:

● Raise prices: customers can choose to pay the higher price. If not, they effectively remove
themselves from the customer base. Where price is customized this is a feasible option. When

51
banks introduced transaction fees for unprofitable customers many left in search of a better
deal.
● Unbundle the offer: you could take a bundled value proposition, unbundle it, reprice the
components and reoffer it to the customer. This makes the value in the offer transparent, and
enables customers to make informed choices about whether they want to pay the unbundled
price.
● Respecify the product: this involves redesigning the product so that it no longer appeals to
the customer(s) you want to sack. For example, the airline BA made a strategic decision to
target frequent-flying business travellers who they regarded as high value. They redesigned
the cabins in their fleet, reducing the number of seats allocated to economy travellers.
● Reorganize sales, marketing and service departments so that they no longer focus on the
sackable segments or customers. You would stop running marketing campaigns targeted at
these customers, prevent salespeople calling on them and discontinue servicing their queries.
● Introduce ABC class service: you could migrate customers down the service ladder from
high quality face-to-face service from account teams, to sales representatives, or even further
to contact centre or web-based self-service. This eliminates cost from the relationship and
may convert an unprofitable customer into profit. In a B2C context, this equates to shifting
customers from a high-cost to a low-cost service channel. Frontier Bank, for example,
introduced a no-frills telephone account for business customers who needed no cash
processing facilities. A minimum balance was needed for the bank to cover its operating
costs. Customers who did not maintain the targeted credit balance in their account were
invited to switch to other products in other channels. If they refused, the bank asked them to
close their account.
Empirical evidence on how companies terminate customer relationships is sparse. However,
one study of German engineering companies reports that very few firms have a systematic
approach to managing unprofitable customers. Most respondents confirm that unprofitable
relationships are commonplace; indeed, a fifth of firms have a customer base more than half
of which is not, or not yet, profitable. Companies fall into three clusters in respect of the
customer-sacking behaviours:

1. Hardliners take an active and rigorous stance in terminating unprofitable relationships,

including the regular clearance of their customer portfolio. More qualitative implications,
such as a potential loss of trust in relationships with other customers or negative word of-
mouth, do not seem to hinder their willingness to sack unprofitable customers. The

52
termination of customer relationships aims to improve the profitability of the customer base
by divesting customers who show no signs of ever becoming profitable or strategically
significant.

2 Appeasers take a more cautious approach concerning the termination of unprofitable

relationships, above all due to strategic considerations such as not playing customers into
competitors ’ hands.
3. The undecided are reluctant to terminate unprofitable relationships, mainly because they
fear the costs of attracting new customers.

Customer experience design

While much operations management research has focused on service design, experience
design has received only limited attention (Pullman and Gross 2004). However, there has
been some work in this area. Several „operational‟ tools have been developed to help both
design and assess the customer experience, including creating experience clues (Berry and
Carbone 2007), designing the „service scape‟ (Bitner 1992), customer journey mapping
(Shaw and Ivens 2002, Zomerdijk and Voss 2010), service transaction analysis (Johnston
1999), customer experience analysis (Johnston and Clark 2008), walk-through audits
(Fitzsimmons and Fitzsimmons 1994), and sequential incident technique (Stauss and
Weinlich 1997).
Stuart and Tax (2004) argued that the customer experience can be enhanced by designing the
service system to encourage greater active customer participation. Bate and Robert (2007)
introduced an approach which involves customers in the design of the experience;
experience-based design. Pickles et al. (2008) developed this methodology to demonstrate
how three theoretical components of good design: functionality, engineering and aesthetics
can be used as a framework to improve performance, safety and governance.
In terms of taking a more strategic and holistic approach to experience design, Carbone and
Haeckel (1994) divided experience design into four phases;
1) Acquisition of service experience design skills,
2) Data collection and analysis,
3) Service clue design, and
4) Implementation and verification.

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Later Carbone (2004) suggested five steps;
1) Build a diverse design team,
2) drill down to the experience core,
3) focus on clues,
4) Develop the experience narrative or story line, and
5) Prioritise implementation opportunities.

In 2007 Berry and Carbone proposed a five step approach;

1) Identify the emotions that evoke customer commitment,
2) establish an experience motif,
3) Inventory and evaluate experience clues,
4) Determine the experience gap, and
5) Close the experience gap and monitor execution.

Customer Experience Mapping

It’s a graphical representation of the service journey of a customer (Jones; 2012). It shows
their perspective from the beginning, middle and end as they engage a service to achieve their
goal, showing the range of tangible and quantitative interactions, triggers and touch points, as
well as the intangible and qualitative motivations, frustrations and meanings. There are six
dimensions and three components of experience the map should capture. These represent
important reference points for features of the service design – e.g. how the service is found,
who uses it, what they’re looking for, what information they use, who and what is of most
help etc. By capturing these experiential aspects we ensure the customers’ voice is
represented as the service is designed and implemented. These dimensions help extract
content for the map and generate conversation during the mapping. The responses help in
considering what is to be recommended in the design.

54
Fig 2.2 -Reap Consultants: Virgin Customer Experience Mapping 2012
This is vital to the study as it portrays one major customer experience management strategy
and makes visible the end-to-end experience from the customers’ point of view, showing the
significant interactions, pathways or expectations we need to understand. It also enables the
researcher to really understand what it is to be in the customers’ shoes. It also captures at
visual level complex information and saves time in getting people on the same page because
it doesn’t require lengthy text to explain it. The researcher will expect organisation to be
using this as one strategy to manage customer experience.

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Service Blueprint

Fig 2.3 -Reap Consultants: Customer Experience Blueprint 2012

While the Customer Experience Map represents the experience from the customers’
perspective, a service blueprint represents the service from the customer and business
perspective (Jones; 2012). The blueprint maps out chronologically and in sequence all the
various interactions and actions that occur in parallel when customer and company meet, it
shows all the interactions by and with the customer. So it also illustrates the stages and
complexity of the encounter and distinguishes between the customer experiences (and
decisions) and the systems, invisible to the customer, that operate backstage to ensure that
these are delivered. Together the map and blueprint represent the two key components of
service – how it’s experienced and how it works (Shostack, G. Lynne; 2012) .The service
blueprint is a technique used for service innovation. The technique was first described by
Lynn Shostack, (1984). The blueprint shows processes within the company, divided into
different components as follows , Customer Actions ,Onstage / Visible Contact Employee
Actions , Backstage / Invisible Contact Employee Actions , Support Processes and Physical
Evidence.

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CRM Technologies
Call Centres, IVR, CTI etc
Venkata (2009) defined a call canter as a centralised office used for the purpose of receiving
and transmitting a large volume of requests by telephone. A call centre is operated by a
company to administer incoming product support or information inquiries from consumers.
Outgoing calls for telemarketing, clientele, product services, and debt collection are also
made. In addition to a call centre, collective handling of letters, faxes, live chat, and e-mails
at one location is known as a contact centre. Popovic and Kovacevic (2006) also defined a
contact centre as a facility used by companies to manage all client contact through a variety
of mediums such as telephone, fax, letter, e-mail and increasingly, online live chat. Joachim
(2009) pointed out that customers contact companies by calling, emailing, chatting online,
visiting websites, faxing, and even instant messaging. Call Centres use various technologies
like ICR, CTI and many others. The main key component in customer experience being the
IVR. Bhumip (2003) coined the Interactive voice response (IVR) as a technology that allows
a computer to interact with humans through the use of voice and tones input via keypad. In
telecommunications, IVR allows customers to interact with a company’s host system via a
telephone keypad or by speech recognition, after which they can service their own inquiries
by following the IVR dialogue. Companies also use IVR services to extend their business
hours to 24/7 operation. The use of IVR and voice automation allows callers' queries to be
resolved without the need for queuing and incurring the cost of a live agent. If the caller does
not find the information they need, or requires further assistance, the call is often transferred
to a customer service representative. The call centre literature above has been reviewed to
gain an understanding of management of call centre and IVR which is vital for successful
customer experience management and overall satisfaction.

Complaint management
Albrecht and Zemke (1985) found that of the customers who register complaints, between
54% and 70% will do business again with the company if their complaints are resolved. This
figure increases to 95% if the customer feels that the complaint was resolved promptly.
Customers who have complained to a company and had their complaints satisfactorily
resolved tell an average of five people about the good treatment they received. Hart, et al.,
1990, reported that when the service provider accepts responsibility and resolves the problem

57
when customers complain, the customer becomes “bonded” to the company. McNeale (1994)
found out that about 5% of the dissatisfied customers actually complain to the appropriate
companies but easily tell their friends, colleagues and acquaintances about their experiences.
Thus, companies ought to be aware or routinely investigate how well or badly their customers
are treated. Levesque and McDougall (1996) in their case study on retail banking found out
that if a service problem or customer complaint is ill or not properly handled, it has a
substantial impact on the customer’s attitude towards the service provider. However, the
study did not support the notion that good customer complaint management leads to
increased customer satisfaction. They reported that “at best, satisfactory problem recovery
leads to the same level of customer satisfaction as if a problem had not occurred”. Nyer
(2000) expressed that encouraging customers to complain increased their satisfaction and
especially the most dissatisfied customers and stated that “the more a customer complains the
greater the increase in satisfaction”. Johnston (2001) reported that complaint management,
not only results into increased customer satisfaction, but also leads to operational
improvement and improved financial performance. Other suggested antecedents of customer
satisfaction include: disconfirmation paradigm (Yi, 1990, and Szymanski and Henard, 2001);
performance (Cadotte, et al., 1988, and Bolton and Drew, 1991); affects (Westbrook and
Oliver, 1991 and Mano and Oliver, 1993); and equity (Oliver, 1993 and 1997). Customers
who complain provide an opportunity for the service firm to identify root causes of problems
as well as win back unhappy or dissatisfied customers to retain their future value (Buttle,
2005). A complaints management process should allow company to capture complaints
before customers spread a negative word-of-mouth or take their business elsewhere (Buttle,
1998). Up to two-thirds of customers who are dissatisfied do not complain to the organization
(Richins, 1983). However, they may complain to their social networks. Dissatisfied
customers are likely to inform twice as many people about their experience than customers
with a positive experience (TARP, 1995 in Buttle, 2005). According to Wilson (1991), only 4
percent of the dissatisfied customers actually complain, providing valuable feedback to the
company. The remaining 96 percent choose to simply leave the business and go elsewhere.
Companies choose to deal with complaints efficiently to bring about customer retention,
continuous improvement in service quality and build a customer- focused organization (Looy,
Gemmel & Dierdonck, 2003).

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The customers choose not to complain for some reasons listed in table 2 below.

They do not know how to register a They believe complaining will be useless because
complaint the company don’t care about them or their
complaints

They believe it is not worth the time They fear retribution. For example, many people
or trouble are reluctant to complain about the police.

(Wilson, 1991 and Buttle, 2005)

In summary, the relevance of this sub-section to this study is to better understanding that
customers assess service performance based on their past experiences, benefits received,
service quality and how well queries and complaints are treated. Thus, customer experience
management with the mobile services in Zimbabwe will be assessed based on network
quality, customer satisfaction, billing, validity period and customer care support.

Service quality
Lewis and Booms (1983) postulated that service quality is a term which describes a
comparison of expectations with performance. A business with high service quality will meet
customer needs whilst remaining economically competitive. This aim may be achieved by
understanding and improving operational processes; identifying problems quickly and
systematically; establishing valid and reliable service performance measures and measuring
customer satisfaction and other performance outcomes, (Peter Kenzelmann 2008). Gronroos,
(1984) and Parasuraman et al (1988) defined Service quality as “the difference between
customer expectations and perceptions of service” or “as the customers’ satisfaction or
dissatisfaction formed by their experience of purchase and use of the service” .Oliver (1993)
reported that service quality is a casual antecedent of customer satisfaction and customer
experience, due to the fact that service quality is viewed at transactional level and satisfaction

59
is viewed to be an attitude. Dabholkar et al. (1996) and Zeithaml et al. (1996) reported that
the service quality divisions are related to overall customer experience. Fornell et al., (1996)
expressed that satisfaction is a consequence of service quality. Hurley and Estelami (1998)
argued that there is causal relationship between service quality and satisfaction, and that the
perceptions of service quality affect the feelings of satisfaction.
There are various classifications of the components of service quality in marketing science.
Gronroos (1984) stated that “in service environments, customer satisfaction will be built on a
combination of two kinds of quality aspects; technical and functional”. Technical quality or
quality of the output corresponds to traditional quality of control in manufacturing. It is a
matter of properly producing the core benefit of the service. Functional quality or process
quality is the way the service is delivered. It is the process in which a customer is a
participant and co-producer, and in which the relationship between service provider and
customer plays an important role (Wiele et al., 2002). Technical quality is related to what
customer gets (transaction satisfaction); functional quality is related to how the customer gets
the result of the interaction (relationship satisfaction). Lewis (1987) suggested that service
quality can be classified as essential and subsidiary. Essential service quality refers to the
service offered and subsidiary includes factors such as accessibility, convenience of location,
availability, timing and flexibility, as well as interactions with the service provider and other
customers. The classification can also be the core (contractual) of the service, and the
relational (customer- employee relationship) of the service. (Grönroos 1985; McDougall and
Levesque, 1992; Parasuraman et al., 1991b; Dabholkar et al., 1996). McDougall and
Levesque (2000) in their direct approach investigation on four service firms (dentist clinic,
automobile shop, restaurant, and haircut salon) demonstrated that both core and relational
service quality classes have significant impact on customer satisfaction. Heskett et al. (1997)
conducted studies on several service firms, such as airline, restaurants, etc and reported that
service quality, solely defined as relational quality, has consistent effect on satisfaction and is
regarded as key factor in delivering customer satisfaction. Parasuraman et al. (1988)
identified five dimensions of service quality that must be present in any service delivery.
SERVQUAL helps to identify clearly the impact of quality dimensions on the development
of customer perceptions and the resulting customer experience. SERVQUAL include:
Reliability - the ability to perform the promised services dependably and accurately.
Responsiveness - the willingness to help customers and provide prompt service.
Assurance - the knowledge and courtesy of employees as well as their ability to convey trust
and confidence.

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Empathy - the provision of caring, individualized attention to customers, and
Tangibles - the appearance of physical facilities, equipment, personnel and communication
materials.
The model conceptualizes service quality as a gap between customer's expectations (E) and
the perception of the service providers' performance (P). According to Parasuraman et al.
(1985), “service quality should be measured by subtracting customer's perception scores from
customer expectation scores (Q = P - E)”. The greater the positive score mark means the
greater the positive amount of service quality or the greater the negative score mark, the
greater the negative amount of the service quality.
Pizam and Ellis (1999) stated that the gap that may exist between the customers' expected and
perceived service quality is a vital determinant of customer satisfaction or dissatisfaction, and
not just only a measure of the quality of the service. Previous studies on mobile
telecommunication services, measured services quality by call quality, pricing structure,
mobile devices, value-added services, convenience in procedures, and customer support (Kim,
2000; Gerpott et al., 2001; Lee, Lee, & Freick, 2001). A customer will have an expectation of
service determined by factors such as recommendations, personal needs and past experiences.
The expectation of service and the perceived service result may not be equal, thus leaving a
gap. Ten determinants which may influence the appearance of a gap were described by
Parasuraman, Zeithaml and Berry (1985). Later, the determinants were reduced to five:
tangibles; reliability; responsiveness; service assurance and empathy.Customers experience
level of any purchased service is determined by the perceptions of quality received. Therefore,
customer experience management captures service quality and in this study, the previous
factors used to measure service quality (call quality, billing, customer support, etc) of mobile
telecoms will be used to as a foundation of customer experience management.
Customer’s perception of quality:

Service quality as perceived by the customer may differ from the quality of the service
actually delivered (Gronroos; 1984). Services are subjectively experienced processes where
production and consumption activities take place simultaneously. Interactions, including a
series of moments of truth between the customer and the service provider occur. Such buyer-
seller interactions or service encounters have a critical impact on the perceived service. The
Nordic Model, originated by Gronroos (1984) and developed by others, adopts a

61
disconfirmation of expectations approach. This claims that customers have certain
expectations of service performance with which they compare their actual experience. If the
expectations are met, this is confirmation; if they are over performed, this is positive
disconfirmation; if they are underperformed this is negative disconfirmation. According to
Gronroos (1984), the quality of service as perceived by customers has two dimensions; a
technical or outcome dimension and a functional or process-related dimension. What
customers receive in their interaction with a firm is clearly important to them and their
quality evaluation. This is one quality dimension, the Technical Quality of the outcome of the
service production process. However, as there are numerous interactions between the service
provider and customers, including various series of moments of truth, the technical quality
dimension will not count for the total quality which the customer perceives he has received.
The customer will also be influenced by the way in which technical quality- the outcome of
the process is transferred to him and this will have an impact on the process experience.
Examples include the accessibility to a call centre, appearance and behaviour of waiting staff,
how service employees perform their task, what they say and how they do it. An
organization’s image is also important variable that positively or negatively influences
marketing activities. Image is considered to have the ability to influence customers’
perception of the goods and services offered (Zeithaml and Bitner, 1996).Thus, image will
have an impact on customers’ buying behaviour. Image is considered to influence customers’
minds through the combined effects of advertising, public relations, physical image, word-of-
mouth, and their actual experiences with the goods and services (Normann, 1991). Similarly,
Grönroos (1983), using numerous researches on service organizations, found that service
quality was the single most important determinant of image. Thus, a customer’s experience
with the products and services is considered to be the most important factor that influences
his mind in regard to image. It is not the experiences of the quality dimensions alone that
determine whether quality is perceived as good, neutral or bad. Figure 2.8 illustrates how
quality experiences are connected to traditional marketing activities resulting in a Perceived
Service Quality. Good perceived quality is obtained when the experienced quality meets the
expectations of the customers i.e. the expected quality. If expectations are unrealistic, the
total perceived quality will be low, irrespective of the experienced quality measured in an
objective way being good. As illustrated in figure 2.3, the expected quality is a function of
factors, namely, marketing communication, word of mouth, company/local image, price,
customer needs and values.

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 Image

Expected
Experienced
quality
Total perceived quality quality

Image
 Marketing
communication
 Sales
 Image Technical Functional
 Word of mouth quality: quality:
 Public relations
 Customer needs and WHAT HOW
values

Figure 2.3: Total Perceived Quality, (Gronroos, 2001)

63
 2.2.6.1 Gaps between customer expectations and perceptions:
In an attempt to explain gap between expected service quality and perceived service quality,
Parasuraman et al (1985), came up with a ‘gap model’ which is intended to be used for
analyzing sources of quality problems and help managers understand how service quality can
be improved. The model is illustrated in figure 2.9.

Word of mouth Personal needs Past experience

communications

Customer Expected service

Gap 5
Perceived service

Gap 4
Service delivery (including pre External communications to
Company
and post contacts) consumers

Gap 1 Gap 3

Translation of perception into

service quality specifications

Gap 2
Management perceptions of
customer expectations

Figure 2.4: The Gaps Model (Source: Parasuraman et al, 1988)

Firstly, the model demonstrates how service emerges. The upper portion of the model
includes phenomena related to customers, while the lower portion includes phenomena
related to the service provider. The expected service is a function of the customer’s past
experience and personal needs and of word of mouth communication. It is also influenced by
the market communication activities of the firm. The service experienced, which in this
model is termed as perceived service, is the outcome of a series of internal decisions and
activities. Management perceptions of customer expectations guide decisions regarding

64
service quality specifications to be followed by the company when service delivery (i.e. the
execution of the service express) occurs. The customer experiences the service delivery and
production process as a process-related quality component and the technical solution received
by the process as an outcome-related quality component. As illustrated, marketing
communication can influence the perceived service and also the expected service. This basic
model demonstrates the steps that have to be considered during analyzing and planning
service quality which culminates into customer experience. This model is key aspect and a
foundation in building customer experience which is a sum of various aspects including
service quality.

Service Recovery
The real test of the customer orientation of a service provider takes place when service failure
has occurred. Ideally, quality should be high throughout and failures should not occur in the
service processes. However, in reality employees make mistakes, systems break down,
customers in the service process may cause problem for other customers, etc. Service
recovery is a strategy for managing mistakes, failures and problems in customer relationships
(Gronroos, 200) As defined by Tax and Brown (2000) (in Gronroos 2001),
“Service recovery is a process that identifies service failures,
effectively resolves customer problems, classifies their root cause(s),and yields
that can be integrated with other measures of performance to assess and improve the service
system.” Service recovery includes all actions taken by company when there has been a
service failure. Services fail for different reasons- sometimes technical service fails;
sometimes functional service quality (Keaveney, 1995 in Buttle, 2004). Problems caused by a
service failure are two-fold; factual and emotional problems (Gronroos, 2001). In a
problematic situation when service recovery is called upon, customers are often frustrated,
possess high expectations and tend to have a narrower zone of tolerance than normal (Tax et
all, 1998). Therefore, service recovery could be risky (Smith and Bolton, 1998) and needs to
be well managed. Service recovery performance can be better if the employees are more
committed to the visions, strategies and service concepts of the firm. Moreover, empowered
employees can be expected to perform better in recovery situations, inclined to deal quickly
and effectively with service failures (Boshoff and Allen, 2000). When companies resolve
problems quickly and effectively there are positive consequences for customer satisfaction,
customer retention and word-of-mouth (Tax et al, 1998). Service recovery process should be
developed and exercised to maximize fairness as perceived by the customer (Ruyter and

65
Wetzels, 2000). In addition to mistake correction, quick response and adequate compensation
are considered crucial elements of service recovery (Johnston and Fern, 1999). It has been
discovered that customers who have been let down, then well recovered, are more satisfied
than customers who have not been let down all (Hart et al, 1990). A well-managed recovery
has positive impact in development of a trusting relationship between a firm and its customer
and may also deepen the customer’s commitment towards the service provider (Tax et al,
1998). Service recovery is an important factor influencing customer experience and is one of
the effective customer experience strategies.

Managing Customer Rage

Managing customer experience translate into reduction of customer rage. Unhappy customers
are far more likely to share their stories with others (and average of about 28 people) than are
those who are satisfied or pacified (10 to 16 people). Customer rage is an intense anger
coupled with expressions of physical, verbal, or other potentially harmful behaviours in
response to a dissatisfying service experience. It can potentially result in severe negative
consequences for firms, employees, and even other valued customers. Fortune 500 firms are
so concerned about this problem that some are installing new software in their call centers to
detect rising levels of anger in customers’ voices so that management may intervene to
prevent an incident escalating to rage. Furthermore, the Entrepreneur magazine noted that
consumers are getting angrier every year.

How to reduce customer rage in your organization.

Just say no. How much money do companies spend on customer service and yet put
roadblocks to prevent customers from actually reaching them? If this sounds like your
company, you may need to re-think how you approach the problem. Many think improved
customer experience is about saying “yes” to your customers all the time, but instead, try
setting up policies to say “no” easier on the first go round. It’s true that they’re not going to
be happy if you say no, but they’ll be less happy if they have to call four times before they
get to that no.
Say you’re sorry. If you give an apology, explanation or chance to vent, you move most
people from being dissatisfied to mollified or even satisfied. This can also be done by having
complaints resolution unit which call out all previously recorded irate customers.
Pick up that phone! Self-service technology is a real top dislike in terms of complaint
handling. And self-service technology can’t offer an apology. “Customers want to talk to a

66
real person. If they have an option to talk to someone, even if they don’t take it, they will be
much more satisfied,” noted Bitner. Many companies set up a call center, VRU, or 800
numbers and think they’re done, but it’s not the end of the story. One tip? Have your CEO
call your company every month and test it. You’ll quickly hear if the system’s working or
not.
Avoid other rage-inducing faux pas. Customers don’t appreciate repeating information over
and over as they pass through the system. They also want to see less typos and grammatical
errors. Particularly heinous, customers don’t appreciate piggy back selling, especially when
you haven’t resolved their initial complaint yet. And coaching answers to a satisfaction
survey, especially after a bad experience, is a definite no-no.
Customer retention strategies

Customer Rage pictures

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An advertising board was set up outside the World Wear shopping centre in Boskruin,
South Africa with the statement “The most useless service provider in SA – Cell C Sandton
City”

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CHAPTER FIVE

MEASURING CUSTOMER EXPERIENCE

 How do we measure Customer experience

 How do we use other customer service instruments to measure experience
 Which instruments are most used by leading organisations

Measuring improvements towards better customer experience!

The performance of individual peers can be measured by the amount of calls they handle, or
the average time they spend with customer regarding the issue complexity has been told
earlier, those metrics will not support the overall customer experience improvements. Of
course, the customer experience management is about the efficiency in terms of reduction of
cost, but more importantly about improving the loyalty. Dixon and Toman (2013) have been
searching for the ideal way to measure overall customer satisfaction with the service centre
and based on their findings, created Customer Effort Score in 2010. It was based on a simple
question in a form of post-interaction survey:

“How much effort did you personally have to put forth to get your issue resolved?”. Answer
was measured on a 1-5 scale (1-very low effort, 5-very high effort). The problem of this
metric was that customers viewed 5 as very bad and 1 as very good, so they were often
marking 2, which wasn't able to show improvements over time. Also, some customers
understood this question as how much have they had to try to resolve the issue. Three years
later, authors of the effort metric introduced a new version of CES, called CES v2. Again,
based on one simple question, but with a lower chance of misinterpretation. Customers were
asked whether they agree or disagree on the scale with the statement: “The company made it
easy for me to handle my issue” (1-Totally agree, 7-Totally disagree). The research shown
that the answered results of a new question were strongly correlating with the customer
loyalty and 12% more predictive towards loyalty. Another discovery was that the service

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centre experience is more impactful on a customer loyalty if the switching cost in selected
market segment are low and/or customer haven't a strong attachment to products or services.

When it comes to measuring customer experience, there are a variety of means to it. A
division can be made based on passively received and actively acquired information. This
division is made based on how the information reaches the company. This is either via
spontaneous feedback initiated by customers or as a result or different kind of surveys or studies
about the company’s service quality. Figure 2.9 collects different ways to measure customer
experience.

Figure 2.4 . Means for measuring customer experience (Adapted from Löytänä and Kortesuo
2011: 188)

As shown in Figure 2.4, on the passive side, spontaneous feedback refers to customer
initiated feedback that the customer gives in a self-chosen way, time and place. Encouraging
spontaneous feedback involves making easy to use channels available for it in carefully
selected touch points, and that the feedback results are tied to those touch points when
analysing them. In this kind of spontaneous feedback the extremes stand out, since the nature
of the feedback is usually either highly positive or highly negative and very rarely of a
moderate type. Spontaneous feedback is often a chance for discourse with the customer.

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Therefore, it can be a chance for creating value for customer. Automated replies hardly
express appreciation for feedback several pages long and a reply coming weeks later in the
modern day does communicate some level of indifference towards the person giving the
feedback. (Löytänä and Kortesuo 2011)

Customer Lifetime Value

Kumar (2008) asserts that customer lifetime value (CLV), is a prediction of the net profit
attributed to the entire future relationship with a customer. He further added that CLV is used
to calculate customer equity and is measured with absolute and relative. However Lynette
Ryals (2008) argued the most difficult part of calculating LTV is in deciding what a
“lifetime” is given that Lifetime Value doesn't exist without a LifeCycle. According to Ryals
(2008) the LifeTime Value concept has been horribly abused and misunderstood over the last
several years. Reinartz (2005), purported that it is often helpful to estimate customer lifetime
value with a simple model to make initial assessments of customer segments and targeting.
According to Shaw & Stone (1988) possibly the simplest way to estimate CLV is to assume
constant and long-lasting values for contribution margin, retention rate, and discount rates, as
follows

where is yearly gross contribution per customer, is the (relevant) retention costs per
customer per year (this formula assumes the retention activities are paid for each mid year
and they only affect those who were retained in the previous year), is the horizon (in years),
is the yearly retention rate, is the yearly discount rate.
Advantages of using CLV:
 management of customer relationship as an asset
 monitoring the impact of management strategies and marketing investments on the
value of customer assets
 determination of the optimal level of investments in marketing and sales activities
 Implementation of sensitivity analysis in order to determinate getting impact by
spending extra money on each customer V. Kumar (2008).
 optimal allocation of limited resources for ongoing marketing activities in order to
achieve a maximum return
 a good basis for selecting customers and for decision making regarding customer
specific communication strategies Lynette Ryals (2008)

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  Measurement of customer loyalty (proportion of purchase, probability of purchase
and repurchase, purchase frequency and sequence etc.) V. Kumar (2008).

Fig 2.5 - (Adopted from Kurma and Reinartz (2005), p.125)

Lynette Ryals (2008) pointed that in theory, customer value represents the amount of profit
generated from each customer, and therefore their willingness to spend money to acquire or
retain each customer. However, calculating customer value is very difficult due to its
complexity and the uncertainty surrounding customer relationships. In order to calculate
customer value, the following parameters are required:
Churn rate: is the percentage of customers who end their relationship (contract or
subscription) with a company in a given period. Therefore, one minus the churn rate is the
retention rate. Discount rate: is the cost of capital used to discount future revenue from a
customer. Retention cost: is the amount of money has to be spent in a given period to retain
an existing customer. Period: is the length of customer relationship decided to be analysed
(one year is the most commonly used period). Customer lifetime value is a multi-period
calculation (for example; 3-7 years). Periodic: revenue is the amount of revenue generated by
a customer in the period. Profit margin: is the difference between revenue and costs, even
though this may be reflected as a percentage of gross or net profit. Using the analytical result
of customer value evaluation, the value of customer experience management to the company
can clearly be outlined.
The life time value of a customer is a building block in management of customer experience
and clearly outlines benefits derived by a business if it manages the customer experience.

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The researcher will also use this concept in identifying loyalty programmes being utilised by
the case company in creating value from long relationship with customers.

Net Promoter Score

Net Promoter Score is a customer loyalty metric developed by Reichheld, Bain & Company,
and Satmetrix in 2003. Reichheld (2003) Net Promoter Score (NPS) is best known customer
loyalty tool around today, based on the entirely sound principle that the more customer
promoters you have (i.e., customers who say on surveys that they're highly likely to refer
your company to a colleague or friend), the more likely you'll be to grow your business and
outpace the competition. That makes powerful sense, and the continued growth and success
of Net Promoter is a testament to the idea's relevance and value (Bruce Simpson, p.345). NPS
can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a
promoter). According to Markey et al (2009) an NPS that is positive (i.e., higher than zero) is
felt to be good, and an NPS of +50 is excellent. Markey, Reichheld and Dullweber (2009)
concurred that the score can be used to motivate an organization to become more focused on
improving products and services for customers. They further alluded that a company's Net
Promoter Score correlates with revenue growth. The Net Promoter approach has been
adopted by several companies, including E.ON, Philips, GE, Apple Retail, American
Express, Bearing Point, and Intuit. It has also emerged as a way to measure loyalty and
customer experience.

Figure 2.6. Net Promoter Score (Source: Reicheld 2003)

To calculate your company’s NPS, take the percentage of customers who are Promoters and
subtract the percentage who are Detractors. NPS is the percentage of promoters minus the
percentage of detractors. Neutrals (7-8 rating) are not considered in the NPS calculation
(Reicheld 2003). Promoters are considered loyal and willing to recommend a company to

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others. The Neutrals are considered as rationally satisfied customers but emotionally neutral
and can easily change the service provider with fairly minimal effort by the competition.
Customers answering 6 or below, are seen as detractors. Detractors are susceptible to leave as
soon as better offer is presented by competition. At worst, they are experiencing negatively
charged feelings of the value destroying cluster. (Shaw 2007: 124). Therefore, NPS is a
simple way for companies to measure customer’s willingness to recommend the company’s
offering and also compare the results with competitors. The scores vary greatly between
different areas of business. The score withholds the overall customer experience it is
therefore built from both physical and emotional attributes. NPS is directly linked to the
value driver clusters explained in section 3.4. (Shaw 2007: 124)
Net Promoter Score is also an element used to manage customer experience therefore more
relevant to the research topic. The research would also look into the case company if they are
utilising this metric in managing experience and will also establish the willingness of the
respondents to promote the case company to colleagues.

Voice of Customer

(VoC) programs are about continuous consideration of customer expectations, needs and
wishes in company’s business. In addition to market research surveys, VoC programs include
customer data such as feedback, reclaims and also employee input. (Goodman 2009: 28)
According to Löytänä and Kortesuo 2011 VoC programs seek to use data from in all touch
points and they are especially used when creating new services in IT service business.
Customers have both conscious needs and subconscious needs that companies cannot realize
by listening. Thus, when measuring customer experience, the programs should also actively
seek to discover these needs. This is an area, where customer behaviour tells more than what
they say. In other words, what customers say and what they do are two separate things. For
example customers can seem very excited about a new service, but it does not mean that they
are willing to pay for it. For this reason, companies should be cautious when using VoC in
business decision making. (Löytänä and Kortesuo 2011: 195) Overall, VoC programs use
similar means of data collection as when measuring customer experience, but alone it is not
an all-encompassing customer experience measurement.

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Mystery Shopping

Mystery shopping refers to an activity where a researcher interacts with a company’s service
in a given touch point like a regular customer and observes the company’s or customer
service repetitive behaviour by focusing on predefined attributes. Commonly this method is
used when measuring the service experience in different sales points or customer service
situations (Löytänä and Kortesuo 2011: 197). Unlike in customer satisfaction studies, a
mystery shopping research is used to measure the process, rather than the outcome of a
service encounter (Wilson 1998: 415). When it comes to measuring customer experience,
mystery shopping provides a good view of how well certain service processes functions. It
shows the strengths and areas in need of development within the actual processes. However,
mystery shopping methods struggle to give valid data on the emotional side of the service
experience. This is because a researcher is only an actor in the setting, and does not
experience the service personally like customers do. A researcher does experience the
service, but these experiences are not directly comparable to real customer experiences
(Löytänä and Kortesuo 2011: 197). To conclude, mystery shopping is an observatory type of
activity. It is especially strong in measuring the functionality of processes and is one of the
key customer experience management tools.
The researcher also shares the importance of this metric in data collection and will therefore
use it to observe service delivery in three service centres.

Customer Effort Score

According to Dixon et al (2010: 5) the Customer Effort Score measures the effort a customer
has to make when dealing with a company. The question in this measurement is set up to the
customer as “How much effort did you personally have to put forth to get a service?” The
score goes from 1 (very low effort) to 5 (very high effort). (Dixon et. al. 2010: 5) According
to research made by Dixon et. al., CES serves as a strong measurement for loyalty and word
of mouth prediction and the overall customer experience. Customers who reported a low
effort, expressed that they would buy again and those who reported high effort also reported
that they would engage in spreading a negative word of mouth. (Dixon 2010: 5). As can be
seen from this sub section, CES has its main strength in measuring the smoothness of
experience customers have specifically in an interaction touch point. Dixon, Freeman, and
Toman (2010) concurred that customer effort is a better predictor of customer loyalty than

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any other customer service score. After interviewing customer service leaders and studying
more than 75,000 customers, the Corporate Executive Board concluded that:
Exceeding expectations during service interactions has negligible impact on customer
experience and customer loyalty. Service organizations create loyal customers primarily by
reducing customer effort – i.e. helping them solve their problems quickly and easily – not by
delighting them in service interactions. In the customer service environment, Customer
Satisfaction (CSAT) is a weak predictor of customer loyalty. Net Promoter Score (NPS) is
slightly better. Customer Effort Score (CES), however, tops the charts with the highest
predictive power. A recent study conducted by the Customer Contact Council, a division of
the Corporate Executive Board, of over 75,000 customers found repeating messages in the
results:
Delighting customers does not build loyalty, reducing their effort—the work they must do to
get their problem solved does.
Acting deliberately on this insight can help improve customer experience, reduce service
costs and decrease customer churn.
Dixon (2010: 5) concluded that great customer experience then is the result of an effortless
resolution to their concerns, what happens along the way only adds/subtracts from the end
result. Fig 2.6 shows customer effort score in a typical call centre.

Fig 2.6 -Customer Effort Score ( Dixon 2010: 5)

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(Dixon 2010: 5) purported that 96 percent of customers who put forth high effort to resolve
their issues are more disloyal—an eye-opening number when companies consider that 59
percent of customers report moderate-to-high perceived additional effort in a service
interaction. The difference between the customer effort score and other well-established
metrics such as Customer Satisfaction (CSAT) or net promoter score (NPS) is that it operates
effectively on the transactional level and better captures the disloyalty effect of service
interactions (Toman, et al 2010).

Measuring Customer Satisfaction

Customer satisfaction provides a leading indicator of consumer purchase intentions and
loyalty. (Reibstein et al; 2010). Customer satisfaction data are among the most frequently
collected indicators of market perceptions. The principal use of Customer Satisfaction is
twofold: Farris, et al (2010). Within organizations, the collection, analysis and dissemination
of these data send a message about the importance of tending to customers and ensuring that
they have a positive experience with the company’s goods and services. (Farris, et al (2010).
Although sales or market share can indicate how well a firm is performing currently,
satisfaction is perhaps the best indicator of how likely it is that the firm’s customers will
make further purchases in the future. Much research has focused on the relationship between
customer satisfaction and retention. Studies indicate that the ramifications of satisfaction are
most strongly realized at the extremes. According to Farris, et al (2010) on a five-point scale,
individuals who rate their satisfaction level as '5' are likely to become return customers and
might even evangelize for the firm. A second important metric related to satisfaction is
willingness to recommend. This metric is defined as the percentage of surveyed customers
who indicate that they would recommend a brand to friends. When a customer is satisfied
with a product, he or she might recommend it to friends, relatives and colleagues. This can be
a powerful marketing advantage. Individuals who rate their satisfaction level as '1,' by
contrast, are unlikely to return. Further, they can hurt the firm by making negative comments
about it to prospective customers. Willingness to recommend is a key metric relating to
customer satisfaction. (Farris, et al 2010). Hunt (1982) reported that by the 1970s, interest in
customer satisfaction had increase to such an extent that over 500 studies were published.

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This trend continued and Peterson and Wilson (1992) estimated the amount of academic and
trade articles on customer satisfaction to be over 15,000.Several studies have shown that it
costs about five times to gain a new customer as it does to keep an existing customer
(Naumann, 1995) and these results into more interest in customer relationships. Thus, several
companies are adopting customer satisfaction as their operational goal with a carefully
designed framework. Hill and Alexander; (2000) wrote in their book that “companies now
have big investment in database marketing, relationship management and customer planning
to move closer to their customers. Jones and Sasser (1995) wrote that “achieving customer
satisfaction is the main goal for most service firms today. Increasing customer satisfaction
has been shown to directly affect companies’ market share, which leads to improved profits,
positive recommendation, lower marketing expenditures (Reichheld, 1996; Heskett et al.,
1997), and greatly impact the corporate image and survival (Pizam and Ellis, 1999).

Challenges in the application of Customer Experience Management

According to Edvardsson, et al (2000) customer experience management is more than lip
service and customer experience is actually going beyond satisfaction of customers. He added
that top team management are detractors of customer experience for they talk of customer
service in annual reports and strategic review meetings whilst when it comes to funding of
customer services initiatives will be of less priority. Lack of training was also cited by
Feagin,(1991) as a key component which affect application of customer experience. He also
added that involving other departments in customer service issues is a huge challenge for
other departments will be focusing on their line of duties and targets, sentiments which were
also shared by Fisk (1985). Lack of will and a culture which resist change was cited by
Flyvbjerg (2006, pp. 219) as a key enemy to application of customer services. Lastly Fornell,
C. (1992) cited level of economic development, technological development and service
industry growth as key factors which contribute to the application of customer experience
management.

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CHAPTER SIX

CUSTOMER TOUCH POINTS

By the end of this chapter the leaners should know

What are the key customer touch points

Explain the key strategies to be deployed for each.

What specific things are we doing at each touchpoint?

Are the touchpoints addressing customers’ motivations, and answering their questions
or allaying concerns? Are they working for your target customers, and for novices and
experts alike?

Are the touch points addressing your customers’ unmet/underlying/latent needs? Are
there needs going unstated that neither you nor competitors are solving?

Are all the touch points speaking with the same tone, the same message, even the same
words? Is your brand being communicated effectively and clearly?

Are there hiccups in the flow from one stage to the next that may cause potential
customers to drop off, or cause dissatisfaction for current customers (and perhaps
costly product returns or help-line calls)?

Are the touch points differentiating you from competitors and helping retain the
customer?

Customer Touch Point Defined

A touch point is defined as all of the communication, human and physical interactions your
customers experience during their relationship lifecycle with your organization. It is only
loosely constrained: a touchpoint can occur in different locations and can involve different
people. It could include sales agents, customer service representatives, superintendents,
project managers, etc. The main actual touch points are web-based, digital, service centres
and telephonic based.. Touchpoints are important when managing customer experience
because customers form perceptions of your organization and brand based on their

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cumulative experiences. It is thus imperative to understand the management aspects of all
touch points to achieve total positive customer experience .

Understanding Customer Touch

A Touch point usually is known using different names which are contact point, customer
contact, Moment of Truth, point of contact among others in describing the interface of
a product, service or brand with customers/users, non-customers, employees and
other stakeholders, before, during and after a transaction. Companies have always tried to
communicate with consumers through different kinds of marketing activities, striving to
reach as many potential customers as possible (Spengler and Müller, 2008). In order to
perform effective touch point management, a successful company needs to know which touch
points that are the most important to consumers in all its markets (Spengler, 2009; Spengler
and Müller, 2008). However, this may sound easier than it is.
The recent shift within marketing towards a more customer-based view has led to a state, in
which many companies are not aware of different touch points’ effects on customers. Until
recently, the primary attention of marketers has been within traditional marketing activities,
focusing on how the company would like to communicate with their customers (Schultz,
2003). However, due to changed consumer behaviour, an increase in communication ways
and an increase in actors on the market the times have changed (Spengler and Müller, 2008).
Companies have begun to recognize the need to listen to how the customers want to be
communicated with (Schultz, 2003). With this new insight, marketers begin to realize that not
only planned efforts, such as advertisement, contribute to build customer brand experience,
but rather all possible touch points the customers have with the brand matter (Kotler, et al.
2005; Spengler, 2009). Those firms aware of this have gained a competitive advantage
compared to those that remain in the old way of thinking (Spengler and Wirth, 2009). There
are a number of different definitions of brand touch points. Spengler and With (2009) explain
touch points to be all the different contact points at which brands are experienced by
customers, non-customers and other stakeholders.
Websites, employees, call centres, recommendations from friends, products, physical stores
and annual reports are all examples of this. Due to the variety of touch point definitions
available and the lack of a single generally accepted one, this study follows its own definition:

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“Touch points include all contacts with a company or the brand of the company where the
consumer is sure of which company or brand he is dealing with.”
Every company has customer touch points and it is important to manage them in the right
way (Spengler and Wirth, 2009). One example is the Swedish multinational fashion company
Hennes & Mauritz (H&M, 2008a) that we have applied as case in our study. Their business
idea is to offer fashion of good quality to the best price with a consistent message in all their
different markets (H&M, 2009a). All touch points contribute to building customer brand
experience (Kotler, et al. 2005; Spengler, 2009), but a strategy focusing on many different
touch points is no guarantee for success (Spengler and Wirth, 2009). Furthermore, touch
points differ in their importance (Boatwright et al., 2009). This implies the need of a touch
point analysis, checking whether customers recall experiencing Hennes & Mauritz in
different touch points and the touch points’ influence on the customers. By analysing their
touch points and pinpoint those most important to consumer experience and focus upon those,
Hennes & Mauritz may be able to create more satisfied customers. This customer satisfaction
can in the long run result in brand loyalty, which has been known to boost companies’
financial results (Torres-Moraga, V’asquez-Parraga and Zamora-González, 2008).
Brand Touch Points
It is not until recently that touch points and their contribution to a brand’s image and
exprience have been brought into the light and so far, the research within the field is limited.
Due to this, the term “touch points” can mean different things to different researchers and the
definitions we have come across during our literature studies have similarities but also
differences. Stone et al. (2002 p. 40) call touch points “the points at which products and
services are purchased or serviced”. A definition that focuses on the products and/or services
that a company has to offer. Mårtenson (2008) takes this definition a bit further by suggesting
that touch points are every contact customers have with a company. This includes everything
that brings a customer to think about the specific company: from word-of-mouth
recommendation to marketing activities such as for instance a TV commercial. Spengler and
Wirth (2009) expand this definition still further by including customers as well as non-
customers and other stakeholders. They also talk about different touch points before, during
and after a purchase. From these wide definitions, we can tell that the number of a company’s
touch points can be quite huge. To exemplify, mid-sized firms usually manage over one
hundred touch points (Spengler and Wirth, 2009).2 Different touch points also have different
roles to fulfil and these roles may vary between different companies. They also work in
different ways in order to fulfil those roles (Hallward, 2008). Mårtenson (2008) exemplifies

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this by stating that it is important for a company to understand these different roles and
purposes in order to be able to focus on those touch points influencing the consumer
behaviour the most. There are various opinions on which touch points that are the most
important ones. Boatwright et al. (2009) state that among all available touch points, the
product itself is one of the most important ones due to its potential of creating strong
relationships with the customers. Furthermore, the recent years’ fusion between the on- and
offline worlds has made many online activities such as for instance online-forums, become
more and more important (Spengler and Wirth, 2009). About ten percent of the customers are
influenced by new types of information sources, such as the Internet, e-mail, mobile phones
etc, when making buying decisions. Online communities such as Facebook and MySpace are
also of bigger importance than before. Furthermore, there is also a trend going towards on-
demand services such as over the mobile or digital television.
Touch Point Categorization
Across all industries touchpoints can be divided into paid (classical push media with
advertising messages), owned (companies own marketing instruments, sales
consultations,website, brochures, etc.) and earned ones (test reports, recommendations by
customers,etc A number of researchers have come up with different categorizations of touch
points. Here we present some: Dunn and Davis (2004) sort the touch points into three
different categories based upon the customer experience:
Pre-purchase experience touch points – These touch points are of great importance regardless
of whether a customer will purchase the brand in question or not. These include contact
points such as word-of-mouth, the Internet and advertising.
Purchase experience touch points – Touch points that make a customer purchase a brand and
not just consider it. These are touch points such as customer centre contact and physical
stores. Post-purchase experience touch points – Just as the name suggests, these touch points
influence customers after their purchase. Typical examples include the product itself,
warranties, customer services and customer satisfaction surveys. To exemplify the meaning
of this, word-of-mouth may trigger a purchase, but during the purchase, the sales person may
be the one influencing the customer’s experience. Post purchase touch points include things
like billing, maintenance of products, services and so on (Mårtenson, 2008). Mårtenson (2008)
has another way of categorizing touch points. The controllable comprises all touch points that
a company is able to completely control in its implementation. Influenceable entails the touch
points that the company can influence but not completely control, and finally the

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uncontrollable comprises all touch pints that cannot be controlled at all. Mårtenson also
differs between outbound touch points initiated by a company and inbound touch points
initiated by customers. Both types are necessary in marketing communication but there are
some differences between them.
As the Internet develops, more customers can find new ways of spontaneous contacts with
companies. Spengler and Wirth, (2009) states that new media technologies allow the
customers to actively participate and shape their own media experiences, making inbound
touch points more important than they previously have been. Spengler and Wirth (2009) also
talk about touch points from a purchase-point-of-view even though they do not sort them into
categories based upon this. Instead, they use four other categories: one-to-one, point of sale
(POS), indirect and mass media. Half of the consumer’s subjective brand experience arises
from the various touch points at the point of sale. This includes everything from shop layout
to sales personnel. Around one third of customer’s experience comes out of friends’
recommendations and product reports from tests.
Touch Point Management Consumers’ good experiences with a brand usually do not just
occur on their own (Hughes, 2008), thus some sort of touch point management is needed.
However, this is hardly as easy as it sounds. Companies usually know a lot about consumers’
buying behaviour, income levels and so on, but hardly know anything about their thoughts
and emotions when interacting with the company and its various touch points (Meyer and
Schwanger, 2007). Moreover, even if they do know about customers’ preferences, some
companies are simply afraid to act upon these consumer actions (Meyer and Schwanger,
2007). There are multidisciplinary goals and benefits to achieve with touch point
management (Spengler and Wirth, 2009). For instance, by evaluating a firm’s different touch
points it is possible to optimise the company’s investments and increase the quality of the
various contacts with customers. Furthermore, consistency can be provided throughout the
touch points, which is seen as important. Edwards (2009) states that inconsistency throughout
the different touch points may cause consumers to lose trust in the company, which may lead
to decreased sales and profit. Spengler and Müller agree upon the latter by saying that the
way to success is to provide an integrated experience among the most important touch points.
According to Spengler (2009), there are five steps within touch point management:
1. Touch point audit: Includes screening the business for important touch points and
screening the own company for important touch points. The important touch points matter
regarding the business, the company and the target group with which the company wants to
communicate.

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2. Touch point analysis: In the second phase, the value and width of the touch points are
tested out of the customer perspective. This is done through market research and is thereupon
statistical evaluated.
3. Define optimizing goals according to the touch points analysis results
4. Implement the optimizing goals
5. Tracking: This phase includes checking the implemented goals in order to see whether
changes have to be made
Just as well managed touch points can contribute a lot to customers’ positive brand
experiences, touch points not that well managed can harm a brand extensively (Hogan,
Almquist and Glynn, 2005). Philips (2006) means that touch points can influence the brand’s
profitability by being snakes, ladders or just part of the brand communication. Snakes are
those touch points that prevent customers from purchasing a product or service whereas
ladders are those that inspire customers to purchase. Every touch point can be a snake or a
ladder, and it is important for companies to identify these snake and ladders in order to satisfy
people’s desires and the company’s results.
Touch Point Evaluation
Mårtenson (2008) suggests that it has become necessary to discuss customers’ different
relationships with a brand in a sense that includes other variables besides the traditional
media contacts. Furthermore, it is important for a company to analyze its touch points and
their influence on the firm’s customers. Dunn and Davis (2004) state that spending money on
the touch points, most important to the customers, will create customer satisfaction and brand
loyalty, which in the end will strengthen the brand exprience. There are multiple benefits to
receive from having a strong brand. Not only is a customer more likely to actively choose the
company’s goods but there are also indirect benefits such as higher return on investment to
receive (Mårtenson, 2008). Because of this relationship it is important for companies to know
what triggers customer satisfaction and what turns customer satisfaction into brand loyalty
(Mårtenson, 2008). Firms with a successful brand loyalty management are well aware of and
manage their customer touch points in order to ensure consistency in the brand’s key context
(Aaker, 2008). Spengler and Wirth (2009) state that all of a company’s brand touch points
matter. Nevertheless, in order to become a successful brand-builder it is necessary to identify
the company’s most important touch points and how they influence customer experience
rather than spend a lot of money in all channels available (Hogan, Almquist and Glynn, 2005).
Hogan et al (2005) reports of the “do everything” approach as a common mistake made by

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firms seeking to satisfy their customers. In fact, a firm’s inability to adapt its touch points in
different channels may result in customer losses (Chan, 2005). Successful brand builders
evaluate the different touch points (Hogan et al., 2005) and focus on those they believe will
generate the potentially most important customers (Mårtenson, 2008). A company should
therefore focus its resources upon those touch points that create the strongest brand
experience and make customers change their behaviour accordingly (Spengler and Wirth,
2009). Spengler and Müller (2008) provide a way of evaluating touch points by checking
them on three indicators:  Information value: How well does the touch point transfer the
brands message to its customers  Attractiveness value: How attractive is it for the consumers
to get information regarding the brand through the touch point
 Transaction value: How much does the touch point influence customer behaviour, and
especially the buying decision
Mårtenson (2008 p. 167) presents another way of evaluating touch points by asking the
following questions: How important is the touch point in question? What kind of impression
do customers receive? Do customers’ expectations and experiences of the touch point match?
What kind of message does the touch point deliver and is this message consistent with that of
the company? Are the resources spent on a touch point reasonable when looking at its
importance?

Touch Point Effectiveness Analysis to Improve the Customer Experience

Each of us can recall good and bad customer experiences - whether an online buying
experience, the responsiveness from a supplier or the encounter with someone on the front
line. We remember and hopefully reward the stellar. And when it comes to the mediocre and
downright terrible we react by taking our business elsewhere or not making a referral. As
business leaders we understand the importance of every single interaction a customer or
prospect has with our company, especially in today's environment of intense competition, low
switching costs, and increased commoditization. In the dynamic environment we're in right
now, we need to recognize that customers are re-evaluating everything. The vast number of
touch points associated with the overall customer experience makes for a complex process.

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Therefore it is important to understand how each touch point contributes to the overall
customer experience because an issue encountered at any one of these points can dramatically
influence the overall experience. So what are some things your company can do to begin to
understand how to improve customer experience and engagement? We have found that
companies truly focused on improving customer engagement do at least three things: they
identify all the key touch points a customer has with their company, measure the effectiveness
of these touch points and use them to create a map of the customer experience.
It All Begins with Touch Points
A customer experience does not begin and end at a transaction, visit to a website, or
conversation with customer service. The customer experience process encompasses the
moment the customer becomes aware of your company and is comprised of multiple
independent interactions, transactions, and contacts along the way. Ron Shevlin, author of
Everything They've Told You About Marketing Is Wrong and an analyst at Aite Group, LLC,
suggests the following definition for customer engagement: "Repeated interactions that
strengthen the emotional, psychological or physical investment a customer has in a brand."
All these repeated interactions are actually touch points. For our discussion, we will define a
touch point as any customer interaction or encounter that can influence the customer's
perception of your product, service, or brand. A touch point can be intentional (an email you
send out) or unintentional (an online review of your product or company). As the stories at
the beginning suggest, touch points begin long before the customer actually makes a purchase
and long after they have made their first transaction. The goal of every company interested in
leveraging customer experience as a competitive advantage is to create a positive and
consistent experience at each touch point.
Touch points need to include every encounter in the attraction process, such as your website,
blog, email, newsletter, press coverage, articles, industry events, webinars, brochure, product
literature, advertisements, etc to samples, white papers, product demos, initial calls, sales
presentations and meetings, to your contract, product deployment or delivery process to your
customer service, invoice, trouble ticket, to a loyalty card or referral program in your
retention process. As you can see for most companies this is going to fairly long list.
Inventory Your Touch Points
When you inventory your touch points you will want to know at least the following:
1. Where the touch point is typically encountered in the customer life cycle.

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2. The operational purpose of the touch point. On the operational side a touch point may be
designed to identify a prospect, resolve a problem, accelerate conversion or support executing
a transaction.
3. The role of the touch point should in the customer experience such as influencing
perception, building preference, or creating loyalty.
4. Who owns the touch point. For example, appointment scheduling may be owned by
presales, invoicing by accounting, and the website by marketing.
5. The touch point’s value. While all touch points matter, they are not equal. A bad
experience on one touch point may be enough to make a customer leave you but a bad
experience on another while irritating and potentially damaging if fixed in time can be
overlooked.
Although overarching metrics such as customer satisfaction and customer advocacy are
quickly becoming standard metrics today, attempting to measure the customer experience
with a single metric can be overly simplistic and risky. Touch points are an opportunity to
communicate who you are and what you are all about to the customer. They allow you to
connect and create an emotion.

Listed below are a few of the main touch points everyone should not ignore.
Walk in Service Centres and Website

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The first interaction a customer usually has with any online business is through the
website. This is the modern day storefront. With a website the first thing you need to do is to
be able to quickly communicate-
Who you are
What you do
How you are going to be able to solve the customer’s need
This should be done in the first 5-10 secs of the user being on the site. Beyond that a website
should be used as a continuing education resource and as a customer service tool. It should be
the hub that allows your customers to find out deeper information on what you offer. The
website is a resource to help them answer questions or get validation on what you are
providing. Every aspect of your website should communicate a story to either educate or
entertain (or both) your potential customers. The website should be created with a purpose
and with a call to action.
Product/Service
This is the actual product (or service) your customer will be using. This is the biggest
representation of your company. If the website is the glitz and glamour, the product is your
hammer. Your product is the centerpiece to building a business and a reputation. Without a
quality product the rest of the touch points become empty and full of fluff. As important as
the product is we always try to remind ourselves we can’t get trapped in singling out this
touch point. All touch points are necessary to create the ultimate customer experience.
Customer Support/Call Centre
One of the more valuable touch points usually occurs during some emotional event of the
customer with the company. This is where a company’s real opportunity is to shine.
Customer support can be rough.
It can be a thankless, stressful, and extremely difficult job.
Customers want to blame someone. If you represent the company, they blame you.
Customers never call when they are happy. They only call when something is broken.
Most – not all – customers want to vent and to receive compassion before a solution.
Sometimes, they only want to vent.
Customers, contrary to popular belief, are often very wrong and quite misguided.

It’s during customer support when a company is able to convert a paying customer into a life
long loyal customer. It’s all in how you are able to respond. Always remember that a

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customer contacting you about a customer service issue is a blessing! They are giving you an
opportunity to make it right.
Social Media
More and more users look to social media to help evaluate companies. Social media is a
window into your company and it should give customers the ability to identify with your
culture.Companies should only participate in social media in which their customers tend to
hang out and communicate. More than one in four executives cited social media as an
escalating concern in a new survey on risk management approaches from Deloitte and Forbes
Insights(2012). “Social media wasn’t even on the radar a few years ago, now it’s ranked
among the top five sources of risk—the same level as financial risk,” said Fadi Sidani,(2012).
Richard Stern (2012) also noted that the advent of the Internet gave rise to a dramatic
increase in the amount of information available to consumers, which significantly changed
their purchasing habits. Over time sites like Amazon.com put user ratings on their site, which
were obviously not authored by the companies manufacturing the products being sold. Now,
social media is giving consumers access to even more information, and it is for the most part
unbiased, because consumers themselves are openly sharing their likes, dislikes and
experiences with companies and products. While in the past we could ask friends and family
for a recommendation on a new services, however, social media allows consumers to get
dozens of recommendations on services to use quickly for example, once a consumer
changed Facebook status to indicate that she was now jumping to another network within an
hour, she would have recommendations and warning against using other service providers. It
is true that these recommendations are filtered and influenced by personal circumstances and
should be read with care, but these are real users sharing their real life experiences and
thoughts, which can be very helpful to consider prior to making to big purchasing decisions.
This also means customer service representatives are dealing with a more knowledgeable
customer base. Richard Stern (2012) added that Social media channels also provide more
opportunities to make customers feel good. In fact, a recent article in USAToday reported
that Social media has democratized customer service in another way as well, and that’s with
the executive office. However Richard Stern (2012) argued that elevating and prioritizing
customer service is a favourite catch phrase in executive speeches and in annual reports, but
we all know it’s viewed as a place to cut costs, not invest in. They see it as an area where
money is thrown down the drain, rather than invested in customer loyalty. Customer
complaints are no longer just in the realm of customer service; they’re now part of the
corporate world of branding and reputation management and that’s because social media is

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forcing these executives to pay attention. Richard Stern (2011) purported that it may be too
early to see the entirety of the impact social media will ultimately have on customer service.
Social media enables companies reach out to customers but is not a great venue for listening
to customers until it’s too late. Social customer service cannot be done properly without a
strategy and it cannot be a panacea for already disorganized customer service. Complaints
about poor customer services no longer involves in filling out comment cards or sending a
letter to a manager. Customer service has begun to embrace the idea of social networking.
Control is no longer in the hands on these companies, as customers emerge into a self-service
process. It isn’t common to offer customer complaints through word of mouth anymore
instead; unhappy customers place negative comments on website for the whole world to see.
Many companies now offer community forums that are integrated on their websites. Using
these forums, companies encourage customers to reach out to peers to solve product-related
problems. Some of the most commonly used social networking sites used by companies
include Facebook, Twitter, LinkedIn and many others. According to research made by M-
Brain (2010) on social media in Finland focusing on discussions related to customer service,
over half of the running discussions were somehow related to how customers were
experiencing a certain service. Nearly a quarter of discussion revolved around criticism
towards customer service situations when only one per cent of the discussions were
promoting a company or a product based on customer service. Another aspect worth noting is
the sheer volume of discussions – a thousand new discussions related to customer service
started every day and the use of social media is on the rise. (Löytänä and Kortesuo 2011: 192)
Therefore, social media is a significant touch point for companies. All companies have a
presence in social media. Companies are affected by customer perceptions, and those
perceptions are expressed widely in social media.

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