Customer experience (CX) is the sum of all experiences at various touchpoints a customer has with a supplier of goods and/or services, over the duration of their relationship with that supplier. This can include awareness, discovery, attraction, interaction, purchase, use, cultivation and advocacy. It can also be used to mean an individual experience over one transaction; the distinction is usually clear in context.
However, reviewing the ontology of customer experience, there is a disparity between this 'experience as everything' definition and its original intent i.e., experience as in a personal and memorable experience that critically creates a distinct economic offer different from the goods sold and services delivered (ref: Pine and Gilmore). As the economics of customer experience hang on the 'distinct economic offer' definition, one conclusion some commentators have made is that the 'experience as everything' definition is in fact a reworking of 'service excellence'.
A company's ability to deliver an experience that sets it apart in the eyes of its customers serves to increase the amount of consumer spending with the company and, optimally, inspire loyalty to its brand. "Loyalty," says Jessica Sebor, "is now driven primarily by a company's interaction with its customers and how well it delivers on their wants and needs." (2008) 
With products becoming commoditized, price differentiation no longer sustainable, and customers demanding more, companies – particularly communications service providers (landline, wireless, broadband, cable, satellite, etc.) – are focusing on delivering superior customer experiences. A study in the year of 2009 on 860 corporate executives revealed that companies that have increased their investment in customer experience management over the past three years report higher customer referral rates and customer satisfaction (Strativity Group, 2009).
The customer experience has emerged as the single most important aspect in achieving success for companies across all industries (Peppers and Rogers 2005). For example, Starbucks spent less than $10MM 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.
Customer experience management
Customer experience management (CEM or CXM) involves strategy that focuses the operations and processes of a business around the needs of individual customers. Companies have started to focus on the importance of the experience. Jeananne Rae (2006) says that companies are realizing that "building great consumer experiences is a complex enterprise, involving strategy, integration of technology, orchestrating business models, brand management and CEO commitment".
According to Bernd Schmitt, "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." Note: this is a later definition from Pine and Gilmore's seminal HBR article that defined Customer Experience, Welcome to the Experience Economy. Some authors criticize this as a reworking of what Customer Experience (and hence its management) actually means.
According to James Allen et al. (2005), 80% of businesses state that they offer a "great customer experience". This contrasts starkly with the 8% of customers who feel the same way. Allen et al. assert that businesses must be able to execute what they refer to as the "Three Ds":
- designing the correct incentive for the correctly identified consumer, offered in an enticing environment
- delivery: a company's ability to focus the entire team across various functions to deliver the proposed experience
- development ultimately determines a company's success, with an emphasis on developing consistency in execution
In this view, a company must constantly teach, train and develop in order to keep up with the constant demands of providing an exceptional customer experience.
According to Harvard Business Review blogger Adam Richardson, a company must define and understand all dimensions of the customer experience in order to have long-term success.[need quotation to verify] Some companies segment the customer experience into technical interactions with the customer such as use of the web, smartphone or tablet. Other companies define human interaction such as over-the-phone customer service or face-to-face retail service as the customer experience. In the global economy, where technology and bricks-and-mortar business often interact or even compete for the customer base, it is important to recognize all these aspects as having an impact on the customer experience. Every business offers a customer experience. The more aware a business is of what type of experience they want to offer, the more likely they will create a positive experience.
However, despite the best-laid plans, there are certain aspects of the experience that cannot be fully controlled. Individual perceptions, emotions and behaviors can alter the customers' experience (Richardson, A. 2010). So, too, will bad experiences with a product. For example, a piece of equipment that fails to function reliably, or that does not meet longevity expectations, will generate complaints that can propagate through word of mouth or online. For these reasons, customer-experience management is no substitute for good product design and proper product engineering. No amount of customer-experience management can compensate for an unreliable cellphone network, an airline that is unsafe to fly on, a computer that fails to meet expectations, a car that repeatedly fails to start or that needs innumerable repairs, clothing that cannot survive routine laundering, shoes that fall apart while being worn, a wobbly bookshelf that collapses when loaded, a roof that leaks shortly after installation, software that runs slowly and is crash-prone, or home appliances that generate safety hazards or break down too often. The increasing online nature of the modern marketplace does not alter the fundamentals of sound business practice: in the long term, there is no substitute for providing good products and services at a reasonable price.
Perception is about how different people interpret the same environmental stimuli in different ways. One way some companies may improve customer perception is through utilizing diversity. Diversity in hiring will offer different insight or perspectives from different genders, ethnicities or cultural backgrounds. Diversity in staffing also helps to attract and retain a diverse customer base. Whether it is age, race, gender or life experiences, customers are more likely to become a loyal customer if the company offers someone who can understand their journey and guide them through the customer experience. (Williams, C., 2009)
- Thompson, Ed and Kolsky, Estaban (2004-12-27). "How to Approach Customer Experience Management". Gartner.com. Retrieved 2014-12-13.
- Sebor, Jessica (2008-02-20). "CRM Gets Serious". CRM Magazine. Retrieved 2008-05-13.
- Strativity Group (2009), 2009 Global Customer Experience Management Benchmark Study, Strativity Group, Inc.
- Peppers, Don; Rogers, Martha (2005), Return on Customer, Doubleday, division of random House, Inc., ISBN 0-385-51030-6
- Shaun Smith and Joe Wheeler.; Shaun Smith, Joe Wheeler (2002), Managing the Customer Experience: Turning customers into advocates, Financial Times Press, ISBN 978-0-273-66195-5
- Rae, Jeananne (2006-11-27). "The Importance of Great Customer Experiences". Business Week. Retrieved 2012-01-05.
- Bernd H. Schmitt. (2003), Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers, Wiley, ISBN 0-471-23774-4
- Allen, James, R., Frederick F, H., & Barney. (2005, 11 07). The Three "D"'s of Customer Service. Retrieved from Harvard Business School: http://hbswk.hbs.edu/archive/5075.html
- Richardson, A. (2010, 10 28). Understanding the customer experience. Retrieved from Harvard Business Review Blog Network: http://blogs.hbr.org/cs/2010/10/understanding_customer_experie.html
- Allen, James, R., Frederick F, H., & Barney. (2005, 11 07). The Three "D"'s of Customer Service. Retrieved from Harvard Business School: http://hbswk.hbs.edu/archive/5075.html Richardson, A. (2010, 10 28). Understanding the customer experience. Retrieved from Harvard Business Review Blog Network: http://blogs.hbr.org/cs/2010/10/understanding_customer_experie.html Williams, C. (2009). Management 5E. Mason: South-Western Cenage Learning.