CHAPTER 4

The Competitive Bar

Despite years of trying, the sad truth is that many companies are leaving no better impression on customers today than they did 25 years ago. The statistics are eye-opening.

In the summer of 1994, Dr. Claes Fornell launched the American Customer Satisfaction Index (ACSI), a broad cross-industry measure of customer experience quality (first referenced in Chapter 3). Fornell developed the index to fill a void he saw, which was the absence of any national gauge of product and service quality.¹ Over a quarter century (and millions of consumer interviews) later, the ACSI remains a prominent customer experience metric that is frequently cited in the media.

ACSI scores range from 0 (the worst) to 100 (the best). In the third quarter of 1994, the ACSI’s first national, cross-industry measure of customer satisfaction came in at 74.8. Over 25 years later, in the first quarter of 2021, it stood at 73.6.²*

So after decades of businesses’ purported customer experience advances—fueled by everything from Total Quality Management to Lean Six Sigma, from big data to predictive analytics, from customer relationship management (CRM) systems to artificial intelligence (AI) algorithms, from voice-of-the-customer programs to chief customer officers—it’s all resulted in a decrease in overall US customer satisfaction (a 1.60 percent decline, for those of you keeping score at home).

Sure, the ACSI has had its ups and downs over the years, but the bottom line is, this overall measure of customer satisfaction was, in 2021, pretty much unchanged from where it was in 1994. How did that happen? There are a few explanations, which together underscore why companies must focus on customer experience, as well as the competitive advantage they can gain by doing so.

Expectations Are Rising

People no longer evaluate the quality of their customer experiences within industries; they do it across industries. If Amazon lets me track the status of my order through every step, then why can’t my auto repair shop do the same, letting me monitor the status of my vehicle? If Zappos always promptly answers my call with a courteous, knowledgeable, live human being, then why can’t my health insurer do the same?

The fact is, while the overall state of cross-industry customer satisfaction may be uninspiring, there are companies that have succeeded in differentiating themselves and delivering an experience that impresses. Those are the organizations that are setting the customer expectation bar for all others. As a handful of firms have gotten very good at customer experience, it’s shown people what’s possible—and then they start to pine for that when working with other businesses.

Those higher, reset expectations don’t just apply across industries, they apply across business models, too. Eighty-two percent of business buyers say they want the same quality customer experience in a professional capacity as they do in a personal one.³ So if you’re in a B2B business, your client’s expectations aren’t just being shaped by their last experience with another corporate supplier, they’re being shaped by the last great experience they had at Starbucks, Amazon, or Apple.

Customer experience improvements at many organizations simply haven’t kept pace with these elevated customer expectations. As a result, even if businesses are making gradual advances in customer experience quality, it’s not translating into a commensurate rise in overall measures of customer satisfaction, such as the ACSI.

The Delivery Gap Is Widening

As customers become primed for a higher quality customer experience but companies fail to deliver, a disparity ensues. What once might have been described as an expectation/delivery gap has become something of a chasm, as evidenced by a variety of research studies:

   A PricewaterhouseCoopers survey found this gap apparent in each of the 14 industries the firm analyzed.⁴ From healthcare to hotels, from restaurants to retail, from insurance to investments—every industry but one (media) showed a double-digit disparity between the experience consumers said they expected versus what they actually received.

   That gap was also evident in the B2B sphere, where a Salesforce study found that only 27 percent of business buyers believe that companies are effective at delivering a client experience that meets desired standards.⁵

   In their 2019 “Customer Expectations Report,” Gladly, a provider of customer service technology, found that fully three-quarters of people say that customer experience reality falls short of their expectations.⁶

   The 2020 “National Customer Rage Study,” an annual study sponsored by the W. P. Carey School of Business at Arizona State University, found that the vast majority of US households experience problems with the products and services they purchase.⁷

   Last, perhaps the most shocking statistic illustrating how customer experiences tend to disappoint comes from the Oracle Corporation’s “Customer Experience Impact Report.” Their research found that only 1 percent of people felt that their expectations for a good customer experience were consistently met.⁸

Customers are simply not happy, and while their expectations may be rising, their satisfaction surely is not.

Companies Are Delusional

There’s another variable in the mix that is likely hindering satisfaction improvement, and that’s the tendency for companies to think they’re delivering a better customer experience than they really are.

An oft-cited Bain & Co. study found that 80 percent of business leaders believed their organization was delivering a superior customer experience. When Bain asked those firms’ customers the same question, only 8 percent of them agreed with the executives’ rosy assessments.⁹ A more recent Capgemini study reaffirmed Bain’s findings, showing a huge disparity in the degree to which companies view themselves as customer-centric (75 percent of those surveyed) versus their customers (only 30 percent of those surveyed).¹⁰

This chasm of perception—companies viewing their customer experience much more favorably than their patrons—is dangerous. It fosters complacency, leading companies to approach customer experience improvement efforts with far less urgency than is warranted, which means those expectation/delivery gaps never get narrowed, let alone closed.

There’s another form of delusion that some companies engage in that is also worth mentioning. These firms are clearheaded about the quality of the experience they deliver; they know it’s subpar. However, given the competitive environment they operate in (e.g., the lack of substitute offerings, or their domination of the market), they convince themselves that a better customer experience isn’t necessary or even financially prudent. They convince themselves that whatever customer experience delivery gaps and customer annoyances may exist, people will be compelled to tolerate them because they won’t have any other choice. Cable television providers and health insurers—two industries consumers love to hate—are good examples of businesses that often fall victim to this mindset.

What these companies don’t appreciate is that today’s competitive environment rarely looks like tomorrow’s, and by the time that becomes apparent to a firm, it’s often too late. The annals of corporate history are littered with the carcasses of companies, and even whole industries, that thought they had a lock on the market, thought they were untouchable, thought they didn’t need to challenge themselves to innovate and improve the customer experience.

Blockbuster Video. Yahoo. Blackberry. A&P Groceries. The entire taxi industry. They were all, at one time, the biggest players in their arenas. Now, they are either dead or shells of their former selves—victims of their own arrogance, unable to foresee the threat that was posed by new and existing competitors, namely, Netflix, Google, Apple, Whole Foods, and Uber. Those other companies simply figured out a better way to serve customers, a better way to eliminate common frustrations, a better way to distinguish their offering in the marketplace. And the rest is history.

Whatever the reason, be it complacency or conscious decision, the end result is the same. Many companies don’t really understand what it feels like to be their customer or what it could be made to feel like in the future. As a result, they lumber along on the path they’ve chosen, sowing the seeds of dissatisfaction and laying a foundation for failure.

• • •

Customers are expecting more, but many companies are not rising to meet that challenge. Therein lies the competitive opportunity, or the competitive threat—because the other force at play here is that customers are more empowered than ever. With a wealth of information at their fingertips, people can explore their options in an instant. Competing products and services are often just a few clicks away, and that emboldens people to be more demanding and discerning of the companies they choose to patronize.

It’s these competitive dynamics that further strengthen the case for customer experience and underscore how differentiation along the customer experience axis can set a business apart from the crowd and pave the way for success.

CHAPTER 4 KEY TAKEAWAYS

•   People are increasingly evaluating their customer experiences across industries rather than within them. That has set the bar higher for all companies, as customers’ expectations of what constitutes a “good experience” is being informed by the great encounters they have with customer-experience-leading companies.

•   On the whole, companies are not keeping pace with these rising customer expectations. Cross-industry customer satisfaction has been stagnant over the past quarter century, and studies point to a widening customer experience gap between what people want to see from the businesses they patronize and what they actually receive.

•   Complicating matters is the fact that companies tend to have an overly favorable view of their customer experience quality, as compared to their customers. That chasm of perception fosters complacency, which means the customer experience expectation/delivery gaps never get narrowed, let alone closed.

•   These competitive dynamics strengthen the case for customer experience differentiation. People are often unimpressed with the businesses they deal with, and that creates a clear opportunity for those firms that can consistently deliver an exceptional customer experience.

* Note that in the year before the COVID-19 pandemic hit the United States, the ACSI was hovering around 75 to 76. So, while the score dropped further during the pandemic, it alone can’t account for the dismal state of customer satisfaction.