A Closer Look at the Concept of Customer Experience & Customer Satisfaction.
The concept of customer experience has taken on particular importance in the current complex economic landscape. In this context, consumers make their purchasing choices much more carefully, carefully selecting the place where they want to make their purchases. This is because the consumer is no longer looking exclusively for the advantage given by the individual products or services offered by the companies, but shows the strong need to live a shopping experience, which also involves him at an emotional level.
Companies have to respond to the new needs and expectations of consumers, affected by significant changes in their lifestyles and the increase in comfort and consumption. Therefore, investigating customer satisfaction and experience with the company at every point of contact is essential to build good loyalty: the better the customer experience and the response he receives from his expectations, the bigger the bond that will be with the company.
In a market characterized by high levels of saturation and limited customer loyalty, the use of low prices and innovative products is no longer enough. To compete you need to focus on consumer experiences, which are no longer self-generated but induced, and for this reason, in recent years, understanding and improving the customer experience have become critical parts of marketing plans.
To better manage the customer experience, retailers need to understand what the customer experience really means.
What is Customer Experience (CX) really about and why is it important?
The terms customer experience and customer experience management have received increasing attention in recent years in both academic and managerial literature. Although it has assumed considerable importance in the current economic context, the issue of experiential consumption has already been addressed and studied more than thirty years ago by researchers such as Holbrook and Hirschmann, who could define themselves as pioneers and whose work is considered by contemporary publications as the starting point of experiential marketing.
In a new economy like the present one, we have a different type of economic output, goods and services are no longer sufficient. Experiences are events that involve individuals in a personal way, and the value of experience remains tied in the memory of the individuals involved in the event. So the consumer is no longer a buyer of goods and services but a buyer of experience. The customer experience originates from a set of interactions between the consumer and a product, a company, a part of the organization, which provoke a reaction.
This experience is strictly personal and implies the involvement of the consumer at different levels (rational, emotional, sensorial, physical and spiritual): who creates a marketing strategy must keep this in mind because the internal and subjective response that consumers have towards each direct and indirect contact with the company.
Direct contact generally occurs in the course of purchases, uses, services, and is usually initiated by the consumer. Indirect contact concerns unplanned meetings with product representatives, services, or brands of the company and takes the form of recommendations or criticisms through word of mouth, advertising, news reports, reviews, etc. In a “digital” world, the WOM becomes even more important, as well as micro-moments.
And it is worth underlining one thing: the CX involves the whole process of consumer choice, including research, purchasing, consumption and post-purchase. On the consumer side, therefore, it includes his emotional, emotional, cognitive, social, and physical responses to the business. On the company side it covers both elements that can be controlled, such as price, offer, service, staff, atmosphere (if we talk about retail), the website and the experience of the same, and elements that are not under his direct control, such as consumer interactions with other consumers, discussions on the web.
How to analyze the CX and what are the models derived from the literature
The current economic crisis is leading many companies operating in the consumer segment to try to reduce their service levels while risking a reduction in the levels of satisfaction of their customers, who are now accustomed to claiming customer excellence. Such behavior is very risky, especially in markets with high competition, and the phenomenon is all the riskier when customers are unfaithful and more attentive to purchases (sensitivity to variables). As a result, the need for companies to establish and maintain consumer loyalty is becoming increasingly central and urgent.
The competitiveness of a company very often depends on the ability to understand its customers and try to create quality relationships with them. Thus, the study of the customer experience becomes an essential investigative tool to try to detect and disseminate within its organization the opinions that customers have of the company itself and try to exploit this information to achieve the ultimate goal. The aim is to improve the perception that the customer has of the company through the maintenance and enhancement of the loyalty of its customers, primarily through the understanding of the experience.
The management of the experience has, therefore, the task of tracking contacts with customers through interactions in different channels, using and contextualizing the knowledge of its customers, maximizing the service and thus providing an experience that creates a bond with the company. To achieve this, it is advisable to investigate in the best possible way what are the main drivers that guide the experience itself, trying to understand them to be able to act in the best possible way.
CX is multidimensional, and these are key drivers that together influence the outcome of the shopping experience. In other words, the overall experience assumes the role of a dependent variable whose result is in the function of the different independent variables, the dimensions. The identification and measurement of the latter are undoubtedly fundamental for the achievement of winning customer experience since it is precisely from the study of them that we can understand what aspects that consumers consider most important are.
There are many models of analysis of the CX, one that is well suited to different situations provides and that is Ismail, which in 2011 focuses its study focusing on perceived quality and that is also well suited to online in my opinion:
- Perceived service quality
- Brand name
- Core service
The model needs to be applied to businesses that have particularity, centrality, and focus on essential elements (think of SaaS business, for example). This means that we will have to integrate the model and assign a variable a higher weight, of course.
I want to focus on three crucial dimensions: brand, price, assortment, and how these affect the CX.
Brand at the service of experience
The brand is increasingly central to having an impact on the CX. It is therefore essential to analyze:
- The perception of the brand (brand perception)
- First impression
- Moderating effect
Brand perception refers to how information about the brand is received and interpreted by individuals and then translated into action. It can be influenced by both tangible factors, such as location, design, products offered, and intangible factors such as image, trust and sympathy.
By acting on these elements, it is possible to manipulate perception: design can create value for the retailer, increasing brand awareness, supporting brand values, and developing new markets. Based on their perception, customers develop particular expectations that have a significant effect on the evaluations of both the shopping experience and the company. Therefore, when brand perception is formed before the purchase is made, it can significantly influence the customer experience.
The first impression concerns the first interaction that the consumer has with the company and contributes to the formation of brand perception. It does not necessarily derive from a direct experience of consumption, but it can also be formed indirectly, for example, through the comments and recommendations of friends, relatives, acquaintances. The first impression can influence the subsequent experiences of the consumer with the brand in question: it can happen that due to a very negative first impression of the brand, influenced by the criticism of its target group. Due to this, the consumer focuses only on the negative sides of their customer experience and gives little weight or even does not remember the positive sides.
Finally, there is the moderating effect of the brand understood as the ability of the brand to influence the impact of the other determinants of the customer experience. One can cite as an example the case in which a strong brand increases the perception that consumers have of the quality of the products offered concerning the real quality, or the possibility of applying higher prices that, however, do not bother consumers who, on the contrary, consider them adequate.
Moreover, it can allow the company to support the introduction of a technology that otherwise would not be accepted by consumers or to reduce the impact that negative customer experience has on the consumer.
It is therefore important to investigate what is the perception about your brand and look for new ways to improve it, precisely because the brand is a necessary and handy tool to act on the customer experience.
Price as a communication tool
Price is one of the variables directly linked to the consumer’s shopping experience, as it affects the consumer’s behavior and choices.
Literature and studies, as far as the price component is concerned, refers to a large extent to the concepts of loyalty program and promotion.
Loyalty programs are continuous incentive programs with the primary goal of encouraging and rewarding the attitudinal and behavioral loyalty of the consumer and therefore, encouraging the preservation and development of the customer quota. Through relationship building, successful loyalty programs foster a consumer to frequently buy from the planned seller, increasing the amount of purchase over time and increasing the portfolio share for the focal seller/brand.
Consumers must (formally) become members of loyalty programs to obtain benefits, and this implies that loyalty programs should be membership-based and structured according to collection and refund rules. The basic features of a loyalty program include:
- Long term: it is typically designed to be durable so that it cannot be introduced for just a short period. This differentiates a continuous loyalty program from a short-term program because, in its true meaning, it should be a long period of continuous investment.
- Reward: it is structured in such a way as to reward members for their loyalty based on their past, current or future value to the business, which is usually given by the accumulation of some forms of loyalty programs evaluated according to purchasing behavior. Usually, members of loyalty programs are rewarded with discounts, goods, services, personalized offers, or preferential treatment.
- Ongoing marketing activities: The retailer, for example, should adapt its marketing offerings to program members on an ongoing basis, creating a sustainable competitive advantage and increasing the perceived value for program members.
In a world of data, these programs are a goldmine for companies to analyze and predict behaviors. The consumer’s behavioral responses can be divided into two levels of results: the first one concerns the aggregate size, while the second one takes into account the individual size.
With reference to the first dimension, it can be said that, on the whole, loyalty programmes create small positive changes in the measures of aggregate performance, such as in the average frequency of purchase. The performance of a programme depends on the level of competition and the relative market share of the company. Therefore, its overall effectiveness generally decreases with increasing saturation. Companies with a larger market share benefit more from the introduction of a loyalty program as they have more buyers and higher levels of brand loyalty.
At the individual level, a loyalty program can increase customer loyalty and the duration of the relationship through the creation of economic and psychological barriers. Economic barriers refer to the monetary and utilitarian benefits that customers give up by switching to another provider (in any case, economic barriers are not appropriate to ensure the long-term preservation of the customer).
On the other hand, psychological barriers are based on psychological incentives to remain developed through attitudinal fidelity, perceived recognition, reciprocity and a sense of belonging. These barriers are difficult to quantify, but their effects strongly influence attitudinal and behavioral responses, especially in the long run. In this way, customer loyalty and the duration of the relationship depend on the intrinsic motivations of the members and on the perceived value of the loyalty program.
In general, members of a loyalty program exhibit higher levels of behavioral loyalty than non-members. The extent to which spending changes varies according to the type of program, but the best absolute increase in purchasing appears in short-term loyalty schemes, such as the promise of a reward to consumers who spend a certain amount of money within a certain period.
This type of loyalty programs resembles a sophisticated sales promotion that aims to increase the frequency and volume of purchases during the promotional period.
The second concept related to the price variable, which can influence the customer experience, is the promotion. Sales promotion refers to a variety of incentive instruments with a limited duration (short term) and to arouse consumer enthusiasm and a sense of urgency for the purchase. The objective is twofold, in that, on the one hand, it aims to expand its customers by attracting new customers, while on the other hand, it focuses on rewarding and rewarding the loyalty of existing customers. Among the most popular promotions are simple discounts on the usual price, offers at special events, refunds, free samples and tests, discount vouchers, prizes, extensions of guarantees or free maintenance services.
An example of a particularly widespread promotion is the gift card. Every consumer who spends a fixed minimum amount on a single purchase is offered a gift voucher that he can use for a subsequent purchase, usually within a certain period and with a minimum amount of expenditure. This type of promotion will encourage the consumer not only to return to that point of sale again but also to spend a larger amount.
Assortment for retailers and eCommerce
Levy and Weitz define the assortment as “the number of different items in a category of goods”, i.e. the set of goods that a trader sells to meet the needs of his customers. One of the major problems is to define the right assortment, with the right quantities, in the right shops, and when the customer manifests the need. This applies to retailers. For eCommerce the problem is similar, although there are some differences, of course.
The variables available to measure how assortment choices affect the customer experience are:
- Product display
Variety is the number of items that make up the assortment by reference to each product category. The debate around this theme is very heated, there are, in fact, theses both in favor of and against the offer of a wide variety. Conventionally, a wide choice is considered to have a positive effect on the consumer experience as it ensures that customers can find the products that are most in line with their preferences. It also gives consumers greater flexibility in making decisions in the light of uncertain future preferences and tastes.
However, recent research has shown that the benefits of a wide variety can be offset by an increase in consumers’ cognitive costs associated with a difficult choice. Having many alternatives of choice requires more effort than having fewer alternatives, as it requires the assessment of many options. Excessive variety can confuse consumers who do not have defined preferences because of the large number of attributes that need to be assessed to form their preferences and make a choice.
To choose the level of variety to be offered, it will, therefore, be necessary to examine two aspects: the perceived variety and the difference between the perceived variety and the variety required. The variety perceived by consumers does not necessarily reflect the variety offered by the retailer; research (Chernev, 2011) shows that several factors affect the perception of the variety, among them: assortments with more distinct options are perceived as more diverse than assortments with more similar options;
The organization of the assortment influences perceptions as varied but disorganized assortments decreases the perceived variety compared to well-organized assortments; the level of perceived variety is a function of consumer experience: the more their reference scheme is congruent with the layout of the assortment, the better their perception of variety will be.
After understanding the level of variety that consumers perceive in the offer, it must be compared with consumer considerations, trying to understand if they are reassured by the possibility of having all possible options available or if this makes their shopping experience seem too difficult and unpleasant.
Closely related to the variety variable is the size of the assortment, understood as the number of products offered. In fact, very large assortments increase the perception of variety even if the actual variety offered is low. Similar considerations apply to this size to those made for the variety. Wide assortments reassure consumers who will not be afraid to find the product they are looking for finished; however, this does not necessarily have a positive impact on their experience, since when faced with a too wide assortment they may feel whipped at the idea of taking a long time to find what they are looking for and of not being able to focus on the product they are looking for.
The problem of size can be solved by considering the third variable, which is the attractiveness of the assortment: this can be understood as the level of adherence of the products offered to consumer preferences. In general, the assortments contained are preferred in cases where the attractiveness of the options of choice is high, while large assortments are preferred in cases where the assortment includes less attractive products. Retailers can, therefore, make their customers’ customer experience more enjoyable by understanding their tastes and offering products in line with them without having to offer every possible option, thus managing to contain the size and cost of their assortment.
Quality and customer experience influence each other: the possibility of finding products that reflect the desired quality characteristics improves the experience of consumers and makes them more inclined to repeat and increase their purchases; on the other hand, a customer experience of another level improves the perception of quality of the retailer.
The assortment can make the customer experience exclusive through the uniqueness of its offer: the retailer can decide to include products that can be difficult to find elsewhere and customers can be so favorably influenced by the idea of being able to experiment with new products, making the purchasing process more interesting and engaging.
Finally, it is worth mentioning the size of the product display, which refers to how the products are presented. Some research shows how the product display can influence the consumer experience: besides being important to incentivize impulse buying, the way the assortment is presented (e.g. organized vs. unorganized) also influences the perception of variety, the choices made, as well as making product choice easier and more enjoyable.
Think of these dimensions and think of Amazon, for a few minutes. Then read on.
There are of course other variables, as already seen, of particular importance including: the level of loyalty: the brand loyalty, which is the deeply rooted commitment to buy back a preferred product or service consistently in the future, repeating the purchase of the same brand, despite the situational influences and marketing efforts that can change behavior.
Negative critical incidents (CIs) are particular external events that tend to destabilize and negatively affect relations between the consumer and the point of sale; their impact, in fact, is not always negative as it depends on the degree of customer loyalty and the quality of the relationship, but it is important to monitor them constantly and manage them in an appropriate and considerable manner.
The level of customer satisfaction related to previous experiences: the current customer satisfaction influences future expectations and therefore, the consumer experience, the online customer experience: starting from the basics to create your own model.
Rose says that experience plays a key role in online shopping, as well as in the world of retailers, effective sales strategies and successful performance are closely linked to building an excellent customer experience, an aspect demonstrated and widely debated by Verhoef and other researchers.
Rose analyzes the online customer experience (OCE) and highlights how the relationship of consumers with the websites of companies can create positive opportunities to the experience and therefore effective for building a lasting relationship.
The model presents three types of variables: antecedent variables, OCE component variables and outcome variables. Among these, the previous ones, there are ten and they contribute to the emotional and cognitive components of the OCE that, in turn, lead to three behavioral responses: satisfaction, trust and intention to buy back. The model also adapts very well to apps and then to SaaS, noting how the OCE, although faster and perhaps branched (I go so far as to say complex), is relevant to the business of a company.
Obviously, talking about OCE means talking about metrics Analytics on the web, it means talking about web usability but also about copywriting. OCE is everything, but it’s nothing if approached with an approach focused on tools and metrics, before being approached on models of analysis, variables and objectives to be measured and analyzed.