Customer centricity: Customer experience will become a major factor to success

Consumers are more than ever striving for individualism, self-expression, and convenience. At the same time, products and services are becoming increasingly interchangeable. For companies, this means that they need to create customer experiences that set them apart from the competition: remarkable experiences are the key to building long-lasting customer loyalty, explains Uta Niendorf, partner and customer experience expert at Wavestone.

Ms. Niendorf, there’s a lot happening in terms of customer centricity. What’s your view on current developments?

In the age of internet and digital transformation, information asymmetry has shifted in favor of consumers. Knowledge that used to be exclusive to experts can now be easily googled, calculators to compare the prices for energy, travel, or banking are all over the internet. As a result, consumers are much more informed and expect a lot more from their products and services, but also in terms of transparency, convenience, and personalized solutions. At the same time, deregulation and innovation are allowing new competitors to push into existing markets. The insurance market is one example where new players are becoming competitors. Automaker Tesla will start offering insurance and online insurer Lemonade is making it easy and efficient for consumers to take out digital home and liability insurance policies.

This is a clear indication that the product is not necessarily the main differentiator. Insurance is still insurance. It is the customers’ experience that is increasingly gaining in importance. This is precisely why companies must focus on customer-centricity now more than ever.

What is the most important thing to keep in mind here?

Companies need to keep asking themselves: where do customers get a better experience, with us or with our competitors? And what is important to them – does a Tesla customer want to configure their car online or would they prefer seeing and touching it at the dealership? Would an insurance customer rather talk to their representative directly or have their minor damage claim settled within 24 hours without having to deal with bureaucratic red tape? It is crucial for companies to identify these preferences and respond swiftly.

You say that customer expectations will become much more demanding in the future. Will companies eventually reach the limits of what is possible?

One thing is indisputable: companies are increasingly competing on a global level, markets are connected like never before – and with little regulation on a global scale I might add.
Not all traditional players in the various industries will be able to bring about the sort of transformation needed to keep pace with all of this. Instead, customers will flock to those companies that succeed in delivering highly personalized solutions. German saving banks are a good example: if all customers do the majority of their banking online, there is no sense in having 376 locally managed saving banks under the Sparkasse brand with a total of 13,000 branch offices and 205,000 employees. “General stores” without a clear positioning or specialization will disappear.

For some players, the transformation of their business models is already in full swing. Volkswagen, for example, is making the transition from automaker to tech company. And we are seeing other markets transform as well. One example is Ping An: The Chinese insurer uses AI to help its medical team provide around-the-clock medical services to its customers. This includes online consultations, referrals, and the sale and express delivery of pharmaceuticals. Currently, regulatory barriers are keeping these types of competitors from entering local markets, but companies in what was once considered traditional industries still need to adapt. These are exciting developments.

What will become relevant in the five years ahead?

There must and will be even more focus on wowing customers, that is, on creating truly exceptional customer experiences. One important element is hyper personalization, meaning the ability to create highly personalized offers based on products and services that the customer has already looked up, purchased, or used. Streaming providers like Netflix or Spotify and, of course, Amazon are good examples for this: their recommendations vary based on their customers’ individual history although the overall offering is the same for everyone.

Another important building block is preference management. The aim is to let customers decide for themselves when and how they want to receive communication about what and through what channels. Going forward, all of this will be imperative for companies to ensure satisfied and loyal customers, but they also need to be able to do it well. Doing it in a way that is mechanical and passionless will only provoke negative customer experiences and ultimately erode their loyalty and push them towards the competition.

What is the best way to implement both?

On the basis of customer data; the more extensive and the higher the quality, the better. What devices do they use and how fast is their internet? Are they registered users or can you offer them to register? When was the last time they accessed our online store? Do they leave unbought items in their shopping carts, what products or content do they prefer, and what items routinely get sent back? That’s the kind of information you want.

And then there are data and AI models that help forecast customer needs by discovering recurrent patterns in customer behavior. The key is to strike the right balance between making smart use of this data and ensuring responsible data handling based on applicable regulations and consumer protection laws. After all, they need to manage customer expectations also with a view to data protection and ethical data practices. Bring all of this together and you put the customer at the center of everything.

Who do you see as already acting in the best interest of their customers?

There’s a lot of great examples: Lemonade is an insurer that stands out with how quickly they allow their customers to take out insurance. DHL has become exemplary in terms of complete supply chain visibility and proactive communications. And Tesla is looking to start selling auto insurance that rewards careful drivers with low rates. A prime example for transformation.

To conclude: what do you recommend companies do to actively pursue customer centricity?

Three things are important. First, focus on what the customer wants and needs, identify unmet needs and satisfy them. Secondly, make experience innovation a daily habit. That means closing the gap between brand promise and customer experiences. And thirdly, it is essential to make the customer experience a company-wide responsibility. That means breaking down silos and having different business functions collaborate more closely. Going forward, this will enable them to improve customer experiences and fulfill their wishes without jeopardizing profitability and sustainability.