Many business owners and product managers assume the customer experience begins and ends with purchase. In reality, it spans a much wider range of interactions.
Every touchpoint—visiting your website, reading third-party reviews, engaging with ads or social media posts, receiving emails, contacting customer service, or using your product—defines the customer experience. Even product materials and packaging shape consumers’ perceptions.
Successful businesses recognize the far-reaching impact of these interactions and actively shape them through a process known as customer experience management (CXM).
This overview introduces CXM, its importance, and strategies you can implement to enhance your customer experience.
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What Is Customer Experience Management (CXM)?
Customer experience management (CXM) is the process of shaping and optimizing every interaction a customer has with your product or brand. CXM enhances customer satisfaction and trust, fostering brand loyalty and increasing customer retention.
Why Is Customer Experience Management Important?
When the customer experience isn’t well managed, companies have little control over consumers’ brand perceptions. This can lead to lower customer retention, fewer referrals, and lost sales, negatively impacting their bottom line.
Businesses that actively manage their customer experience are better positioned to understand customer variability—how consumers are different from one another—and meet their diverse needs, preferences, and expectations.
“If every customer behaved exactly the way we designed our system for them to behave and asked for things that perfectly aligned with what we were designed to deliver, it would be easy to deliver excellent service,” says Harvard Business School Professor Ryan Buell, who teaches the online course Transforming Customer Experiences. “But the reality is that customers aren’t all the same. They have different needs and preferences, and they don’t follow a script.”
Related: How to Foster Customer Engagement & Acquisition
Reflect on Your Customer Journey Experience
The first step in effectively managing your customer experience is understanding and reflecting on the customer journey—the path a customer takes from awareness of your product or service to consideration, purchase, and, ideally, lasting brand loyalty. This journey includes every touchpoint and interaction across all channels.
In Transforming Customer Experiences, Buell presents a three-step framework to evaluate your customer journey:
- Process stage: Select a stage in your customer journey, such as awareness, consideration, decision, retention, or advocacy.
- Customer experience: Describe what customers typically experience at this stage. What touchpoints exist? What outcomes do you aim for? What emotions or needs drive customers’ decisions?
- Employee experience: Outline employees’ role in this stage, focusing on how they can enhance customer satisfaction, engagement, and value.
Repeating this process for each stage helps identify opportunities to improve and manage the customer experience more effectively.
Tessei: A Customer Experience Management Case Study
The service-profit chain framework is essential in designing your customer experience management strategy. This framework posits that customer satisfaction, loyalty, profit, and revenue growth are directly influenced by the quality of the services you deliver to customers. That, in turn, is influenced by employee satisfaction, retention, and productivity. Under this framework, employee satisfaction depends on the business providing adequate support—or internal service quality—through training, tools, technology, workplace, organizational structure, and incentives.
To illustrate how much internal service quality can influence the customer experience, consider the real-world example of Tessei, an East Japan Railway Company subsidiary tasked with cleaning bullet trains as they arrive at Tokyo Station, as featured in Transforming Customer Experiences.
Once a train arrived and passengers disembarked, Tessei’s employees had just seven minutes to prepare the train for its next group, which included collecting trash, wiping down tables, cleaning floors and bathrooms, collecting lost items, and rotating all 1,000 seats so they faced the front of the train. With the ticket cost being on par with airfare, customers had extremely high expectations, leaving little room for error.
In 2000, due to reduced commissions and increased demands from its parent company, Tessei needed to cut costs. To achieve savings, it dramatically reduced its employee headcount while increasing its reliance on part-time workers—leading to increased employee turnover, a lack of loyalty, and a decrease in the external service quality customers received.
By reducing its internal service quality without first considering the customer experience, Tessei inadvertently damaged the customer experience, decreasing customer satisfaction, loyalty, and retention.
“When an organization reduces available resources by cutting costs, employee morale drops, performance declines, and, as poor results start to become obvious to stakeholders in the organization, pressure builds,” Buell says in Transforming Customer Experiences. “Unless a leader breaks that cycle, morale will continue to drop. Employee performance will decline further, and pressure will mount. I call this the death spiral.”
Customer Experience Management Strategies
Businesses can implement various strategies to enhance customer experience. Below are four key approaches to consider.
1. Understand Customer Compatibility
When businesses pursue growth, they often focus on expanding their customer base as widely as possible. This approach makes sense; more customers typically means higher revenue and profitability.
However, indiscriminate expansion can also have drawbacks, especially if it attracts customers who are a poor fit for the product or service. Customer compatibility—the alignment between a customer’s needs and the service offering’s attributes—is crucial for satisfaction and long-term success.
“Research has shown that the better the fit between a customer’s needs and preferences and the attributes of a service offering, the higher the satisfaction customers report,” Buell says in Transforming Customer Experiences. “And the higher the satisfaction customers report, the higher their long-term loyalty.”
Rather than aiming to attract as many customers as possible, businesses should focus on identifying their ideal customers and prioritizing efforts to attract them.
2. Provide Organizational Transparency
Research shows that when businesses voluntarily share certain sensitive information—such as the costs incurred to produce a product—it can increase customer trust. This trust can be the deciding factor in a first-time purchase and encourage repeat business.
“When an organization empowers customers with information about the benefits and tradeoffs of its products, customers can make better-informed decisions about whether the product is right for them,” Buell highlights in Transforming Customer Experiences. “This, in turn, allows the company to attract more compatible customers who will be more satisfied and engaged over the long run.”
This strategy, known as decentralized selection, involves giving customers the information they need to determine whether a product or service aligns with their wants, needs, and preferences. Experimenting with increased transparency could help your business attract and retain more loyal customers.
3. Leverage Service Standardization and Customization
Standardizing your service offers several benefits. It enables employees to perform their roles effectively, ensuring consistent service quality—leading to happier, more satisfied customers. It also helps boost employee satisfaction, often resulting in higher retention, productivity, and a more consistently positive customer experience.
At the same time, customizing services to meet individual customer needs can be a powerful strategy for increasing sales without compromising the customer experience.
“Service customization aims to shift the attributes of your service offering to better meet the needs and preferences of the customers you’re serving,” Buell says in Transforming Customer Experiences.
These strategies don’t have to be mutually exclusive. Businesses can balance standardization and customization to create an approach that best serves their offerings and ideal customers.
4. Maintain and Meet Rising Service Standards
For businesses that rely on repeat purchases, the customer experience doesn’t end after the first transaction. Retaining customers requires ongoing attention to the post-purchase experience and a commitment to maintaining high-quality service, especially as consumer expectations evolve.
“The expectations of customers are shaped by the experiences organizations deliver,” Buell says in Transforming Customer Experiences. “When a company is excellent at service, its customers’ expectations tend to rise. As a consequence, companies that are well-regarded for their service tend to have more demanding customers.”
Regularly assess how you can elevate your service quality beyond your current standard. Then, weigh these improvement costs against the benefits of retaining customers and accepting a certain level of turnover. Finding the right balance will help sustain long-term customer satisfaction and business success.
“Even if a company designs high standards into its service processes, customer expectations and preferences can vary,” Buell shares in Transforming Customer Experiences. “It’s hard to please everyone, especially when their expectations are rising all the time. And yet, we must focus on doing so without overextending our operational capabilities.”
Customer Experience Management Is Critical for Service Businesses
Effective CXM gives businesses greater control over consumer perceptions, creating a competitive advantage. Conversely, neglecting CXM can lead to lower customer satisfaction, reduced retention rates, and weakened brand loyalty, all of which directly impact revenue.
If you’re new to CXM, these strategies can be a great place to start. However, it’s equally important to understand how customer experience fits into the broader service-profit chain and how factors like pricing models, value proposition, and customer journey collectively shape it.
To learn these skills, consider taking the online course Transforming Customer Experiences. Through interactive exercises and real-world examples of successful service organizations worldwide, it provides a structured approach to delivering standout customer experiences.
Ready to transform your customer experience and build lasting loyalty? Explore Transforming Customer Experiences—one of our online leadership and management and entrepreneurship and innovation courses—and download our online learning success guide to learn more about how an online program can benefit your career.
