This research note is restricted to the personal use of Jessica Botha(jessica.botha@capgemini.com).

The Definition of Customer ExperienceManagement7 August 2009 | ID:G00169354

Ed Thompson | Gareth Herschel

Customer experience management depends on the definition of customer experience,which, in turn, depends on the definition of experience. Those striving to improve thecustomer experience need to be clear about these definitions to avoid a lack of focusand oversight, and duplication of effort.

Overview

Most organizations already have multiple initiatives to help improve the customerexperience. The challenge is that each team, department or group has its owninterpretation of what it means by "customer experience," and what it means by"customer experience management" (CEM). Creating a consistent definition isimportant in getting the teams to work together, focus efforts and define metrics.

Key Findings

Gartner defines customer experience as: "The customer's perceptions andrelated feelings caused by the one-off and cumulative effect of interactions witha supplier's employees, systems, channels or products."

Gartner defines CEM as: "The practice of designing and reacting to customerinteractions to meet or exceed customer expectations to increase customersatisfaction, loyalty and advocacy."

Recommendations

If you don't have a definition, or cannot agree on one, then use Gartner'sdefinition of the customer experience.

Use Gartner's definition of CEM to help your organization agree on what it is, andto outline the goals and scope of your CEM project or program.

Analysis

CEM depends on the definition of customer experience, which, in turn, depends on thedefinition of experience. So the best starting point is an understanding of the wordexperience.

The Definition of Experience

The dictionary definition of an experience is "the sum total of conscious events," butthis does not do justice to the many meanings of the word experience. A thesaurusexamination of the word experience shows six different meanings:

1. To meet with (verb), meaning to incur, to encounter or to realize. The usage ofexperience here is in the sense of "to experience," and it could be summarizedas interactions.

2. To feel (verb), meaning to be emotional and to sense. The usage of experiencehere is in the sense of "personal experience," and it could be summarized asfeelings.

3. Knowledge (noun), meaning knowing, cognizance or recognition. The usage ofexperience here is in the sense of "a familiar experience," and it could be

experience here is in the sense of "a familiar experience," and it could besummarized as recognition.

4. Wisdom (noun), meaning intelligence or brains. The usage of experience here isin the sense of "a life-long experience," and it could be summarized asintelligence.

5. Empiricism (noun), meaning to practice, trial and error, or to use "rules ofthumb." The usage of experience here is in the sense of "guided by experience,"and it could be summarized as best practices.

6. Skill (noun), meaning dexterity, handiness or style. The usage of experiencehere is in the sense of "an expert in," and it could be summarized as expertise.

The variety of meanings explains why there are so many interpretations of the termcustomer experience. It also shows why making changes to the customer experienceinvolves the use of intelligence and analysis to improve rational, logical outcomes forthe customer, and other improvements must have a positive effect on customers'emotions. Likewise, it shows why some activities will be aimed at a single interaction orencounter, while others aim to improve an experience over a series of interactions,because experience can mean both single and multiple events. When organizations orindividuals talk about the customer experience, they are usually referring to one of thefirst two interpretations: interactions or feelings.

The Gartner Definition of Customer Experience

Gartner defines customer experience as: "The customer's perceptions and relatedfeelings caused by the one-off and cumulative effect of interactions with a supplier'semployees, systems, channels or products."

Based strictly on the definition of experience above, the definition of customerexperience should be "the sum total of a customer's conscious events." The Gartnerdefinition differs from this strict interpretation because:

Most practitioners tend to talk about interactions, rather than conscious events.

It is clear that the perceptions of an interaction, and the feelings it generates,are key to the customer experience.

The sum total of a single interaction is a single experience, while the sum total ofmultiple interactions is a cumulative effect.

There are many other definitions of customer experience that also focus oninteractions, for example:

CRMGuru: 50% of survey participants agreed with the definition "the sum total ofall my interactions with a brand's products, services and people."

Wikipedia: "Customer experience is the sum of all experiences a customer haswith a supplier of goods or services, over the duration of their relationship withthat supplier. It can also be used to mean an individual experience over onetransaction; the distinction is usually clear in context."

This focus on interactions means that customer experience has often been associatedwith customer service. Early definitions of CEM often saw customer experience as oneof the responsibilities of the customer service department, because of the department'sconcern with customer satisfaction goals. More-recent definitions now see customerservice as just one among many departments that all have a role to play in improvingthe customer experience, along with logistics, sales, marketing, R&D, manufacturing,finance and all other departments that have interactions with the customer..

Experiences generate feelings, and the most recent definitions since 2005 have tendedto also focus on the impact on the customer's perceptions and feelings about theinteraction, for example:

CustomerThink (2006): "A customer experience is the customer's perception ofinteractions with a brand, from marketing communications to sales and serviceprocesses to use of the product or service."

Perceptions are formed from expectations that the customer has prior to theinteraction, and are reset based on what happens during the interaction and whathappens afterwards in response to the interaction. Expectations are formed from pastexperiences, those created through word of mouth and the promises made by thesupplier either directly or indirectly.

Customer experience is often used to mean brand experience and user experience.

However, they have subtle different meanings. User experience has a narrowermeaning related to the use of the product or core service, rather than the wholecustomer experience. The brand experience has a broader meaning than the customerexperience, probably because the customer's experience of the brand is only one(albeit the most important) viewpoint, and other stakeholders, such as shareholders,suppliers and employees, also have an experience of the brand. These three differentterms are clearly related. User experience is a subset of the customer experience,which, in turn, is a subset of the brand experience.

However, the big question is: How do your customers define the customer experience?Gartner clients state that the understanding of the term customer experience by theircustomers varies widely, particularly between industries. For example, in theautomotive industry, the repairs experience is second only to the driving experience. Inretail, the customer experience is heavily determined by the customer's ability to check-out without queuing, locate products and gain assistance in how to make use ofproducts.

Action Item: Understand what your customers think of when they hear the term"customer experience." If you don't have a definition, or cannot agree on one, then useGartner's definition. In particular, find out what the key "moments of truth" are — thosemoments that either significantly improve the customer experience or make it worse withina customer-facing process. For more details, see "Seven Steps to Customer Process Re-Engineering" and "How Customer Process Attributes Affect the Customer Experience."

The Gartner Definition of CEM

Gartner defines CEM as: "The practice of designing and reacting to customerinteractions to meet or exceed customer expectations to increase customersatisfaction, loyalty and advocacy."

The definition of CEM has developed steadily over the past 20 years, since thepublication of Jan Carlzon's book "Moments of Truth." Other key publications that havemoved the definition forward since then include:

Frederick Reichheld — "The Loyalty Effect," 1996

Joseph Pine II and James Gilmore — "The Experience Economy," 1999

Colin Shaw and John Ivens — "Building Great Customer Experiences," 2002

Bernd Schmitt — "Customer Experience Management: A Revolutionary Approachto Connecting With Your Customers," 2003

C.K. Prahalad and Venkat Ramaswamy — "The Future of Competition," 2004

Martin Lindstrom — "Brand Sense," 2005

Fred Reichheld — The Ultimate Question," 2006

Some consistent themes emerge from these publications. CEM is concerned with theactions taken by a supplier not only to handle an interaction appropriately, but also toprovide a designed and structured approach to anticipating, planning and evenconstraining the customer experience from end to end. It tends to imply putting acustomer's needs first and becoming more customer-centric as an organization, but it isalways balanced by what is economically viable for the supplier. It means being morebalanced in weighing the customer's needs and the organization's goals. Often, thosetalking about CEM refer to the ethic of reciprocity. For example:

Strativity — "A business strategy that focuses and redefines the business fromthe customer viewpoint. CEM assumes that products and services are no longersufficient to satisfy the customer and elevate the value proposition to the level ofan experience. At the core of the CEM strategy is an organizational experiencethat defines the value for both employees and customers."

Most definitions of CEM have a focus on the goals of CEM. If CEM is a managementdiscipline or strategy, then it will have goals. The most common are to improvecustomer satisfaction, loyalty, retention, customer advocacy and brand strength. Thesegoals are all interrelated as first demonstrated by work on the service-profit chain in1994 (see "Putting the Service-Profit Chain to Work" Harvard Business Review, 1994).The Harvard Business Review article describes it as: "The service-profit chainestablishes relationships between profitability, customer loyalty, and employeesatisfaction, loyalty, and productivity. The links in the chain (which should be regardedas propositions) are as follows: Profit and growth are stimulated primarily by customer

loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largelyinfluenced by the value of services provided to customers. Value is created by satisfied,loyal, and productive employees. Employee satisfaction, in turn, results primarily fromhigh-quality support services and policies that enable employees to deliver results tocustomers."

Most organizations already have at least one plan, program or initiative to improve thecustomer experience. Most large organizations have multiple disconnected projects andinitiatives to improve the customer experience (see "Fifty Things to Do Right Now toImprove the Customer Experience"). The challenge is that each team, department orgroup has its own interpretation of what it means by "the customer experience," andwhat it means by "CEM." Creating a consistent definition is important in getting theteams to work together, focus efforts and define metrics. The lack of focus andoversight, and duplication of effort in many organizations is expensive, wasteful andeven counterproductive. For this reason, the wording of the definition of customerexperience is less important than the internal agreement on a definition.

Action Item: Use Gartner's definition of CEM to help your organization agree on what CEM iswhen setting the goals and scope of your CEM project or program.

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