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Making Leaders Successful Every Day February 19, 2010  The State Of Customer Experience, 2010 by Bruce D. Temkin for Customer Experience Professionals

Forrester the State of Customer Experience 2010

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Making Leaders Successful Every Day

February 19, 2010

 The State Of Customer Experience,2010by Bruce D. Temkin

for Customer Experience Professionals

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© 2010, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best availableresources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar,and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please email [email protected]. For additional information, go to www.forrester.com.

For Customer Experience Professionals

EXECUTIVE SUMMARY

We surveyed 141 executives from large North American rms to nd out about their customer

experience endeavors. It turns out that 90% of respondents think that customer experience is very 

important for their companies and 80% are trying to use it as an area of di erentiation. While the lack

of funding was the top problem last year, the lack of a clear strategy has emerged as this year’s No. 1

obstacle. ere’s a lot of activity underway: 62% of companies have a voice of the customer (VoC)

program, and nearly half have an executive in charge of their overall customer experience e orts. Ourdata shows that companies with this type of leadership have fewer obstacles and are more mature in

their customer experience e orts.

 TABLE O F CONTEN TSCustomer Experience Is Active In 2010

Customer Experience Leadership Makes A

Diff erence

RECOMMENDATIONS

Get The Entire Company Thinking Outside-In

Supplemental Material

NOTES & RESOURCESIn Q4 2009, Forrester surveyed 141 decision-

makers from North American companies with

annual revenues of $500 million or more.

Related Research Documents

“ The Customer Experience Index, 2010”

January 11, 2010

“ The State Of Customer Experience, 2009”

April 24, 2009

“Obstacles To Customer Experience Success, 2009”

February 20, 2009

February 19, 2010

 The State Of Customer Experience, 2010Lots Of Action, Especially In Companies With Customer Experience Leaders

by Bruce D. Temkinwith William Chu and Rachel Zinser

2

10

16

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CUSTOMER EXPERIENCE IS ACTIVE IN 2010

To understand what companies are up to in their customer experience endeavors, we surveyed 141

executives from large North American rms. eir feedback highlighted that:

· Customer experience is critical. When we asked respondents how important customer

experience was to their 2010 plans, 90% told us that it was very important or critical (see Figure

1-1). But rms aren’t aiming to just keep up with their peers: 80% of the rms want to use

customer experience as a form of di erentiation (see Figure 1-2).

· Most companies have some customer experience discipline. Nearly two-thirds of respondents

say that their companies have a disciplined approach to customer experience management —

although only 11% see their e orts as being very disciplined (see Figure 2).

·

ere’s a lot of e 

ort underway. We asked about the customer experience activities thatcompanies are working on. More than six out of 10 companies have a voice of the customer

program and use a single set of customer feedback scores (see Figure 3). Nearly half of the

respondents have an executive in charge of their cross-channel customer experience e orts.

· Missing strategy has replaced funding as the key problem. About half of the respondents

identied three areas as key issues to their customer experience e orts: lack of a strategy, lack of 

processes, and lack of cooperation across the organization (see Figure 4). When we compared

the problems from last year, funding has become less of an issue while the lack of a strategy has

become a bigger concern (see Figure 5).1

· Firms need more customer experience maturity. We asked the executives whether they agreedwith 12 statements that represent key competencies for Experience-Based Di erentiation (EBD).

Only three items got the nod from a majority of respondents (see Figure 6). Unfortunately, less

than one-third of these companies have employees who share a common view of the customer,

make decisions that take the customer into consideration, and reward employees for improving

customer experience.

· Brands are getting more of the attention they deserve. We compared the results from our

competency evaluations between Q4 2009 and Q4 2008 (see Figure 7). e two areas with the

largest improvements both had to do with brands: employees fully understanding the brand

attributes and infusing the brand in customer experience design.

· All interactions fail to deliver, especially online. Our 2010 Customer Experience Index (CxPi)

shows that customers aren’t being treated well (see Figure 8).2 But how do these executives think

their companies are doing? Not so well either. For  ve of the nine interactions that we asked

them to rate, less than half of the respondents thought they satised customers at least 75% of 

the time (see Figure 9). e online channel received the lowest marks, especially when it came

to customer service.

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Figure 1 Customer Experience Is Critical

Source: Forrester Research, Inc.56316

Base: 141 North American companies with annual revenues of $500 million or more

Not at all important (1)

(2)

(3)

(4)

Critical (5) 62%

28%

7%

2%

0%

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 141 North American companies with annual revenues of $500 million or more

Stay slightly behind themainstream in our industry

Stay in the mainstreamin our industry

Keep from falling too far behindleaders in our industry

Maintain parity with otherleaders in our industry

Di erentiate ourselves fromcompetitors in our industry

Di erentiate ourselves from allrms across any industry 13%

67%

13%

4%

3%

0%

80% want to

di erentiate withcustomer experience.

“How important will customer experience be in your company’s strategy in 2010?”1-1

“How would you describe your executive team’s goal for customer experience?”1-2

90% think it is

very important

or critical.

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Figure 2 Most Companies Have Some Customer Experience Discipline

Source: Forrester Research, Inc.56316

“How would you describe your company’s overall approach to customer experience management?”

Very undisciplined

Somewhat undisciplined

Somewhat disciplined

Very disciplined

64% have a disciplinedapproach to customer

experience.11%

53%

25%

11%

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 141 North American companies with annual revenues of $500 million or more

Figure 3 Customer Experience Activity Is Underway

Source: Forrester Research, Inc.56316

“To what extent has your company put in place the following items?”

Been doing for sixmonths or more

Been doing for lessthan six months

Not doing but activelyconsidering

Not doing Don’t know

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 141 North American companies with annual revenues of $500 million or more(percentages may not total 100 because of rounding)

52% 10% 14% 16% 8%

35% 18% 17% 23% 7%

36% 13% 11% 33% 7%

53% 10% 19% 10% 8%

53% already have this

62% already have this

49% already have this

63% already have this

A companywide program focusedon improving customer

experience across channels

An executive in charge of 

improving customer experienceacross products and channels

A single set of customer feedback scores (e.g., satisfaction,

Net Promoter Score) that are usedacross the company

A voice of the customer program

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Figure 4 Obstacles To Customer Experience Success

Source: Forrester Research, Inc.56316

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 141 North American companies with annual revenues of $500 million or more

None of the above

Lack of urgency

Lack of understandingabout customers

Lack of executiveinvolvement

Lack of clear customerexperience strategy

Lack of customer experiencemanagement processes

Lack of cooperationacross organizations

Lack of budget

53%

50%

49%

43%

32%

16%

15%

11%

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Figure 5 Obstacles To Customer Experience Success Are Shifting

Source: Forrester Research, Inc.56316

Source: Q4 2006, Q4 2007, Q4 2008, and Q4 2009 Customer Experience Peer Research Panel Surveys

Base: North American companies with annual revenues of $500 million or more

73%

59%

53%

58%

56%

47%

55%

40%

42%

44%

53%

54%

53%

50%

49%

43%

Lack of a clear customerexperience strategy

Lack of customer experiencemanagement processes

Lack of budget Lack of cooperationacross organizations

35%

40%

45%

50%

55%

60%

65%

70%

75%

Lack of a clear customerexperience strategy

Lack of customer experiencemanagement processes

Lack of cooperationacross organizations

Lack of budget

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Figure 6 Companies Aren’t Focused On Target Customers

Source: Forrester Research, Inc.56316

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 141 North American companies with annual revenues of $500 million or more

Percentage of respondents who agree with the following statements about their companies

Employees across the company share a consistentand vivid image of target customers

Decision-making processes systematicallyincorporate the needs of target customers

 The quality of interactions with target customersis closely monitored

Employees across the company are recognizedand rewarded for improving the experience

Our company’s brand drives how we designcustomer experiences

Primary research is used to fully understand theneeds and behaviors of target customers

Employees fully understand the key attributesof our brand

Senior executives regularly interact with targetcustomers

Our company has a clearly dened set of targetcustomer segments

 The attributes of our company’s brand are welldened

Senior executives consistently communicate theimportance of serving target customers

We translate brand attributes into specicpromises we make to customers

60%

59%

53%

46%

45%

43%

41%

40%

31%

31%

30%

24%

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Figure 7 Companies Are Focusing More On Their Brands

Source: Forrester Research, Inc.56316

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: North American companies with annual revenues of $500 million or more

2008

2009

Percentage of respondents who agree with the following statements about their companies

Employees across the company are recognizedand rewarded for improving the experience

Decision-making processes systematicallyincorporate the needs of target customers

Our company has a clearly dened set of targetcustomer segments

Primary research is used to fully understand theneeds and behaviors of target customers

 The quality of interactions with target customersis closely monitored

Senior executives consistently communicate theimportance of serving target customers

Employees across the company share a consistentand vivid image of target customers

Senior executives regularly interact with targetcustomers

Employees fully understand the key attributesof our brand

 The attributes of our company’s brand are welldened

Our company’s brand drives how we designcustomer experiences

We translate brand attributes into specicpromises we make to customers

31%41%

45%

59%

46%

53%

24%

40%

31%

60%

43%

30%

31%

36%

53%

41%

50%

21%

39%

31%

63%

47%

36%

38%

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Figure 8 Forrester’s 2010 Customer Experience Index

Source: Forrester Research, Inc.56316

20% 100%30% 40% 50% 60% 70% 80% 90%

Very poor Poor Okay Good Excellent

Retailers (82%) 73% 91%

= Average industry score

Hotels (80%) 69% 90%

Insurance providers (72%) 63% 82%

Banks (66%) 51% 85%

Credit card providers (65%) 46% 78%

Wireless service providers (65%) 60% 67%

PC manufacturers (66%) 61% 78%

Internet service providers (57%) 29% 68%

 TV service providers (57%) 38% 66%

Health insurance plans (51%) 41% 67%

Industry (average)

Airlines (68%) 50% 80%

Parcel delivery/shipping rms (78%) 78% 80%

Utility providers (63%) 57% 69%

Investment rms (73%) 68% 83%

Base: US online consumers who have interacted with rms in these industries(numbers have been rounded)

Source: North American Technographics® Customer Experience Online Survey, Q4 2009 (US)

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Figure 9 Companies Don’t Satisfy Customers

Source: Forrester Research, Inc.56316

Percentage of respondents who satisfy customers at least 75% of the time

during the following interactions in these channels.

Online

On the phone

In person or in thestore/branch

55%

47%

43%

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 141 North American companies with annual revenues of $500 million or more

60%

49%

38%

56%

62%

33%

Researching aproduct

Buying aproduct

Getting customerservice help

CUSTOMER EXPERIENCE LEADERSHIP MAKES A DIFFERENCE

Companies are denitely making a push to improve their customer experience. And why shouldn’t

they? Our data shows that customer experience correlates to loyalty (see Figure 10).3 To understand

what role a customer experience leader serves inside of these companies, we compared responses

from the 69 companies that had an executive in charge of customer experience with the 62companies that did not have someone in that position. is analysis uncovered that the companies

with executives in charge of their customer experience e orts are:

· More ambitious. Eighty-four percent of companies with customer experience leaders say that

they want to di erentiate their companies with customer experience, compared with 75% of the

other rms (see Figure 11).

· More disciplined. Eighty-two percent of companies with customer experience leaders say that

they have a disciplined approach to customer experience, compared with 40% of the other rms

(see Figure 12).

· More active. Across all three areas of customer activity, companies with customer experience

leaders have more initiatives underway.e gap ranges from 26 percentage points for voice

of the customer programs to 56 points for enterprisewide customer experience programs (see

Figure 13).

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· Less encumbered. Leaderless companies are more likely to run into just about every obstacle

except one: the lack of funding (see Figure 14). Why is that the case? Because rms with

customer experience executives are trying to get more done. e most signicant gaps between

these rms are in the areas of executive involvement and urgency.

· More mature. Across all 12 customer experience competencies, the companies with an

executive in charge scored higher (see Figure 15). e gaps showed up in monitoring the quality 

of interactions with target customers and senior executives communicating the importance of 

serving customers.

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Figure 10 Customer Experience Leaders Have More Loyal Customers

Source: Forrester Research, Inc.56316

Willingness to consider theprovider for another purchase

6.7%

2.1%

-1.5%

-7.7%

Percentage of customers who are loyal compared with industry averages across three loyalty measures

Quartiles are based on companies’ CxPi scorescompared with their industry averages

Topquartile

Secondquartile

Thirdquartile

Bottomquartile

Reluctance to switch businessaway from the provider

8.2%

2.8%

-3.3%

-7.6%

Likelihood to recommend theprovider to a friend or colleague

8.4%

2.8%

-3.0%

-8.2%Base: US online consumers

Source: North American Technographics® Customer Experience Online Survey, Q4 2008

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Figure 11 Customer Experience Leaders Show Up In More Aggressive Companies

Source: Forrester Research, Inc.56316

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 131 North American companies with annual revenues of $500 million or more

“How would you describe your executive team’s goal for customer experience?”

(Percentage of respondents who agree with the following statements)

Stay slightly behind themainstream in our industry

Stay in the mainstreamin our industry

Keep from falling too far behindleaders in our industry

Maintain parity with otherleaders in our industry

Di erentiate ourselves fromcompetitors in our industry

Di erentiate ourselves fromall rms across any industry

17%10%

67%65%

13%16%

1%6%

1%3%

0%0%

69 companies with a customerexperience executive

62 companies without a customer

experience executive

Figure 12 Customer Experience Discipline Comes With Leadership

Source: Forrester Research, Inc.56316

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 131 North American companies with annual revenues of $500 million or more

69 companies with a customerexperience executive

62 companies without a customerexperience executive

“How would you describe your company’s overall approach to customer experience management?”

Very undisciplined

Somewhat undisciplined

Somewhat disciplined

Very disciplined 20%0%

40%

14%

3%

62%

39%

21%

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Figure 13 Customer Experience Leaders Are Active

Source: Forrester Research, Inc.56316

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 131 North American companies with annual revenues of $500 million or more

69 companies with acustomer experienceexecutive62 companies withouta customer experienceexecutive

“To what extent has your company put in place the following items?”

A single set of customer feedback scores (e.g., satisfaction, Net

Promoter Score) that are usedacross the company

A companywide program focusedon improving customer

experience across channels

A voice of the customer program48%

80%

83%

74%

24%

42%

Figure 14 Fewer Customer Experience Obstacles Exist When There Is A Leader

Source: Forrester Research, Inc.56316

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 131 North American companies with annual revenues of $500 million or more

69 companies with a customerexperience executive

62 companies without a customerexperience executive

None of the above

Lack of urgency

Lack of understandingabout customers

Lack of executive

involvement

Lack of clear customerexperience strategy

Lack of customer experiencemanagement processes

Lack of cooperationacross organizations

Lack of budget 46%42%

46%

45%

41%

29%

5%

6%

6%

63%

60%

56%

37%

14%

27%

26%

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Figure 15 Leaders Embed More Customer-Centric Behaviors

Source: Forrester Research, Inc.56316

Source: Q4 2009 Customer Experience Peer Research Panel Survey

Base: 131 North American companies with annual revenues of $500 million or more

69 companies with acustomer experienceexecutive62 companies withouta customer experienceexecutive

Percentage of respondents who agree with the following statements about their companies

Employees across the company share aconsistent and vivid image of target customers

Decision-making processes systematically

incorporate the needs of target customers

 The quality of interactions with targetcustomers is closely monitored

Employees across the company are recognizedand rewarded for improving the experience

Our company’s brand drives how we designcustomer experiences

Primary research is used to fully understand theneeds and behaviors of target customers

Employees fully understand thekey attributes of our brand

Senior executives regularly interactwith target customers

Our company has a clearly denedset of target customer segments

 The attributes of our company’s brandare well dened

Senior executives consistently communicatethe importance of serving target customers

We translate brand attributes into specicpromises we make to customers

62%56%

44%

55%

37%

39%

35%

34%

40%

21%

24%

23%

15%

61%

58%

49%

48%

45%

43%

43%

38%

35%

35%

33%

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R E C O M M E N D A T I O N S

GET THE ENTIRE COMPANY THINKING OUTSIDEIN

Companies will gain the most benefit from their customer experience eff orts when they get the

entire company to think about customer needs. How can they do that? By starting with two key

customer experience tools:

· Map the customer journey. Left to their own devices, companies will continue to operate

with an internal focus. That’s why we recommend that organizations use customer journey

maps — also known as touchpoint or “moment of truth” maps — to examine interactions

from their customers’ points of view. Forrester defines customer journey maps as: documents

that visually il lustrate customers’ processes, needs, and perceptions throughout their

relationships with a company.4 We recommend that organizations follow these five steps: 1)

Collect internal insights; 2) develop initial hypotheses; 3) research customer processes, needs,and perceptions; 4) analyze customer research; and 5) map the customer journey.

· Build a robust voice of the customer program. There’s nothing more aligning in an

organization than clear feedback from customers. But most organizations don’t provide

employees with that feedback in a consistent, usable form. That’s why customer experience

professionals should develop strong voice of the customer programs — distributing

actionable feedback to call centers, stores, merchandisers, and category managers.5 A

number of technology vendors are changing the landscape in these programs, making it

easier to do things like analyze unstructured data and share information more broadly.6 

We’ve also identified 16 best practices to follow in areas like leadership, culture, and reacting

to customer feedback.7

SUPPLEMENTAL MATERIAL

Methodology

Forrester elded its Q4 2009 Customer Experience Peer Research Panel Survey to 141 customer

experience professional(s) from North American rms with $500 million or more in annual

revenues in our ongoing Marketing & Strategy Research Panel. e panel consists of volunteers who

 join on the basis of interest and familiarity with specic marketing and strategy topics. For quality 

assurance, panelists are required to provide contact information and answer basic questions about

their rms’ revenue and budgets.

Forrester elded the survey from November to December 2009. Respondent incentives included a

summary of the survey results and related research.

Exact sample sizes are provided in this report on a question-by-question basis. Panels are not

guaranteed to be representative of the population. Unless otherwise noted, statistical data is

intended to be used for descriptive and not inferential purposes.

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If you’re interested in joining one of Forrester’s research panels, you may visit us at http://Forrester.

com/Panel.

ENDNOTES

1 Executives have been saying for awhile that customer experience is important. Only recently, however, have

many of them begun to understand its direct link with loyalty. As a result, companies are starting to develop

more disciplined approaches to customer experience management. But they have a long way to go. See the

April 24, 2009, “e State Of Customer Experience, 2009” report.

2 Forrester asked more than 4,600 US consumers about their interactions with a variety of companies,

gauging the usefulness, ease of use, and enjoyability of those experiences. Based on these consumer

responses, we calculated the Customer Experience Index (CxPi) for 133 rms in 14 di erent industries.

Barnes & Noble, Marriott Hotels & Resorts, and Hampton Inn/Suites topped the rankings, while Charter

Communications took the bottom spot for the third year in a row. Only 13 of the rms wound upwith “excellent” ratings — and 45 were “poor” or “very poor.” See the January 11, 2010, “e Customer

Experience Index, 2010” report.

3 Forrester’s previous research has shown a high correlation between customer experience and three key 

elements of loyal behavior: willingness to buy more, reluctance to switch, and likelihood to recommend. But

how does that a ect a company’s bottom line? To answer that question, we looked at the percentage of loyal

customers within the customer bases of more than 100 companies. It turns out that customer experience

leaders have an advantage of more than 14% over customer experience laggards across all three areas of 

loyalty. e annual revenue gains from a modest di erence in customer experience can total $284 million

on average across industries. See the June 22, 2009, “Customer Experience Boosts Revenue” report.

4 Le to their own devices, companies will continue to operate with an internal focus. at’s why we

recommend that organizations use customer journey maps — also known as touchpoint or “moment of 

truth” maps — to examine interactions from their customers’ points of view. Forrester denes customer

 journey maps as: “Documents that visually illustrate customers’ processes, needs, and perceptions

throughout the life cycle of their relationships with a company.” To get the most value from these journey 

maps, companies need to widely share ndings, take action on insights, and sustain the learnings over time.

See the February 5, 2010, “Mapping e Customer Journey ” report.

5 Many companies say that they don’t have a good connection with customers. at’s why rms should

consider developing a systematic approach for incorporating the needs of customers into the design of 

customer experiences — what Forrester calls a voice of the customer program. Successful VoC programs

will incorporate listening, interpreting, responding, and monitoring. As customer experience professionals

roll out VoC programs, they should be prepared to overcome internal organizational obstacles. See the

February 8, 2007, “Building Your Voice Of e Customer Program” report.

6 Voice of the customer programs are a critical component to improving customer experience. But today’s

e orts are broken in many ways. ey lack action, get caught in silos, and aren’t cost- or time-e ective.

A number of trends are changing how companies implement their VoC programs, including analysis of 

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 The State Of Customer Experience, 2010 

For Customer Experience Professionals

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unstructured and unsolicited data, inclusion of social media, and more continuous feedback. Companies

should take advantage of these trends to dramatically improve their use of customer feedback. e result:

better customer experiences and more loyal customers. See the February 26, 2009, “Voice Of e Customer:

e Next Generation” report.

7 To understand the best practices in voice of the customer programs, Forrester analyzed the 40 applications

it received for its Voice Of e Customer award. When we examined the advice that applicants listed for

other companies, we found 16 recommendations that fell into the following  ve categories: leadership,

culture and alignment, listening to customer feedback, interpreting customer feedback, and reacting to

customer feedback. See the November 11, 2009, “Sixteen Voice Of e Customer Recommendations” report.

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