Customer centricity, company growth and the future of customer listening

In a world where CX mostly still exists in a silo, it’s no secret that many decisions around process, experience and corporate culture are made without reviewing the data on what customers think. 

 “Every CEO or executive operates in a set of complex and sometimes antagonizing dimensions,” says Nicolas Maechler, senior partner at McKinsey & Company. “I have seen through the years when you have positive outcomes on your commercial and financial performance, and your legal and IT teams tell you something is possible, most executives will go ahead with whatever action has been proposed, without also cross-referencing their decision against customer insights,” he continues. 

According to research released by McKinsey earlier this year, only 15 percent of leaders consistently incorporate customer input into decisions, and there are practical barriers preventing companies from truly listening to their customers. However, as Maechler says, this does not mean that only 15 percent of companies listen to their customers.  

“Most companies have measurements in place, some a bit old some very much futuristic. The problem is integrating into that,” Maechler explains. “But the reality is that most leaders see the customer dimension of feedback as something that comes on top, that has an extra layer of complexity.” 

When incorporated as the key to the puzzle, however, he says customer feedback creates an opportunity to increase revenues, reduce costs and even increase the engagement of employees, who may feel the sense of pride in their work has been eroded by negative feedback.

“We think this paradox is the reality of the complexity of what companies and leaders have to deal with. If they take it for what it is, the primary input about their business, you can make a lot of changes, and that's what we're trying to do at McKinsey in our customer experience practice,” Maechler explains. 

In listening to customers, it’s safe to say most companies have survey programs in place. The more advanced organizations may offer predictive analytics and AI, allowing them to look ahead and pre-empt customer needs. However, in the worlds of customer satisfaction and service, “almost nobody is proactive,” Maechler says. “You're waiting for calls, trying to avoid calls, sometimes you’re making sure customers don't reach the call center at all and instead, do everything online. But you don't reach out to customers based on thinking there is a problem.”

Here, McKinsey believes it has a better approach, next best experience, which combines the predictive analytics of the next product that you want to buy as a customer, with the product that you're likely to buy and the predictive experience.

“With these two factors merged, you know as a company what's happening and where the opportunities are with your client. Therefore, you can start to be proactive: proactive on service if you think there's a satisfaction issue, on sales if there is a sales opportunity. Sometimes putting them in the right order, service first sales second, generates tremendously better returns. Because if you’re obviously trying to sell when there is a service issue, it's likely to not go very well,” Maechler adds.

Experience-led growth and doubling revenue

In short, Maechler says deeply listening to customers in this way can unleash experience-led growth. In fact, according to the research launched in January, companies that place CX at the core of their operations achieve twice the revenue growth of their less customer-focused peers. 

Some growth comes from product-led innovation, with the iPhone probably the strongest international example of recent years. But that’s not what experience led growth is. Most growth is incremental and for this, customer feedback is paramount. Therefore, experience-led growth is down to the ability of an organization to reposition efforts in line with the idea that listening to customers is financially and competitively beneficial. 

“Customer experience, at the heart of it, is a simple equation. It's observed performance by the customer minus their expectations,” Maechler says. 

“If the expectations are higher than what the customer observes, there is a negative number, which is a dissatisfaction. If you are delivering higher than the expectations, you are creating some sort of positive satisfaction.”

To name a few avenues to growth, higher satisfaction can increase retention, generate new customers, lower churn or justify higher pricing. “But it can also give you the ideas about different business models that you were not expecting to have, such as the low-cost airline business,” Maechler explains. 

This is essentially “a change to the equation of expectations”, Maechler says, which sees customers trained to lower their experience expectations in return for a lower price. 

“It's a simple example of how we think about experience-led growth, either by incremental thoughts on what happens in the delivery of your existing service, or completely different businesses thinking about the expectations completely differently,” Maechler explains. 

Linking CX to the doubled revenue 

Having an equation for experience-led growth is one thing. Measuring it effectively in a way that will resonate with company executives is quite another. 

The key finding from McKinsey’s research was that customer-centric companies achieve twice the revenue growth of their less customer-centric peers. But how can practitioners link their customer-centric decision making to company revenues and therefore prove the value of their work? 

“There's only one way of measuring growth,” Maechler states. “Then, obviously, to measure experience against this, it's a case of are you able to create a self-reinforcing loop of high satisfaction leading to growth?”

On rare occasions he says a company may overdeliver and invest in experiences that do not add to the bottom line, but cost money to deliver. “In other cases, some are underdelivering, and here you need to measure how you're doing against expectations, and therefore have a measure of satisfaction against your growth,” Maechler explains.

“We believe that if you are truly customer-centric, and you can take the NPS, CSAT, a willingness to recommend, a customer effort score and so on, they are mostly correlated to each other. The point is not the measure, the point is that you use it consistently across the company, not just at the brand overall reference level, but at the lower levels with customer journeys, for example. Understanding how you compare the different journeys, what are the journeys that are particularly satisfying,” he advises. 

“Choose your metric for measuring growth, choose a metric for measuring satisfaction, stick to it and make it percolate within the organization.” 

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