Customer experience investment fails to pay off as performance hits all-time low
UK brands have seen perceptions of their customer experience fall as they fail to meet consumers’ expectations or adapt to new ways of buying.
Delivering world-class customer experience continues to rise up the agenda for marketers. But despite UK brands ploughing billions of pounds into improving their relationship with consumers, they are failing to keep up with increasingly high expectations.
Indeed, KPMG Nunwood’s annual Customer Experience Excellence study shows that rather than improving, the overall performance score for British brands has hit the lowest level in the eight-year history of the report, dropping from 7.33 in 2016 to 7.08 this year. By comparison, the score for US brands rose from 7.42 last year to 7.75 in 2017.
“Customer expectations are rapidly rising but brands are failing to keep up, with many not making the necessary internal connections to ensure a consistent experience across all touchpoints,” says David Conway, director at KPMG Nunwood.
The research reveals that brands that might have been famed for their customer experience a decade ago are failing to keep pace with consumers’ ever evolving requirements and aspirations when it comes to the service they receive. And part of the issue is that organisations are not structured to think effectively about the customer, says Conway.
“Businesses are still organised in the same way they were in Victorian times when we were building factories that churned out consistent objects. We’re now in a world where we sell concepts, content, ideas and thoughts and the traditional organisational structure really isn’t effective in being able to do that.”
QVC tops the ranking
However, there are brands that buck the trend. Shopping channel QVC has climbed 18 places to claim the top spot for the first time, knocking last year’s winner First Direct into third place. Lush, which topped the charts two years ago, came in fifth. John Lewis Finance, a new entry for 2017, jumped into second place, while John Lewis comes in fourth.
|Brand||Score (out of 10)||Position 2017||Position 2016|
|John Lewis Finance||8.19||2||n/a|
|Skipton Building Society||7.90||7||33|
|Marks & Spencer||7.83||9||16|
The findings are based on a survey of 10,000 consumers who are asked to rate brands on the six metrics that KMPG Nunwood believe drive brand advocacy and loyalty: personalisation, time and effort, resolution, integrity, expectations and empathy. Full top 100 below
While QVC may seem like an unusual winner, Conway says the shopping channel has been on a “significant journey of improvement” since 2011.
“QVC is a great example of a business that understands its customer, understands the psychology of its customer and has organised itself in a way that delivers exactly what that customer needs in a way the customer wants it,” he says.
READ MORE: First Direct repositions as it admits customer service is no longer a differentiator
For example, he adds, the business has built the brand around empathy both from an organisational point of view, by putting itself in the shoes of its customers, but also by making its presenters and communications aligned to its customers’ values.
“QVC’s improvement has been slow and steady but inexorable. It is really clear on the experience it is seeking to deliver and the brand is entirely connected internally around delivering that experience,” he adds. “Empathy pervades its television communications and its online communications, as well as the contact centre in Liverpool. Everybody is focused on the customer so it should be no surprise it’s done so well.”
That clear focus on what they want to achieve is a clear trend among brands that did well in this year’s ranking. They deliver a targeted experience that is consistent across all channels, which comes from connecting all parts of the customer strategy.
“If you imagine every part of the strategy being a small engine, [these brands have] managed to get all their engines pointing in the right direction. It’s a critical part of success. For larger organisations it’s about integration, cohesion and ensuring they deliver the purpose they’ve set out to,” says Conway.
The biggest risers and fallers
Other brands that have improved notably since 2016 include Center Parcs (up 54 spots to 12th), Travel Republic (up 57 to 25th), LV= (up 68 to 32nd), Standard Life (up 100 to 33rd), Holiday Inn Express (up 88 to 41st), KLM (up 83 to 46th) and Littlewoods (up 100 to 61st).
If you imagine every part of the strategy being a small engine, [these brands have] managed to get all their engines pointing in the right direction. It’s a critical part of success.
David Conway, KPMG Nunwood
At the other end of the spectrum, some of this year’s biggest fallers include Mothercare, which falls 66 places to 88th, Yorkshire Building Society (-60 to 87th), Superdrug (-55 to 95th), New Look, (-40 to 70th), Asos (-39 to 64th) and TSB (-36 to 71st).
Grocery and non-grocery retail are the two best performing sectors overall, followed by financial services, restaurants and entertainment brands. Despite a number of brands seeing significant improvements in 2017, travel remains the sixth best category for customer experience, followed by telecoms, utilities, logistics and public sector.
Customer experience isn’t just a differentiator
Improving customer experience is not just a way to differentiate from competitors, it is also a driver of commercial value. It may seem obvious to suggest brands that get customer experience right will see a boost in profitability, but there is in fact a significant uplift.
Over the past five years, the top 10 brands in KPMG Nunwood’s survey have achieved 10 times the revenue growth of their FTSE 100 counterparts, while the UK’s overall top 100 brands have seen 1.5 times the revenue growth of the bottom 100 brands.
Within the top 100 itself the top 10 brands achieve three times the revenue and profit growth versus the bottom 10 brands.
The brands that have seen most improvement over the past five years – the ‘transformational’ brands – have achieved four times the revenue growth and 50 times the profit growth.
“There is a very strong economic link between the quality of the experience you deliver and the shareholder value that’s created for the business. There’s no doubt that the quality of the experience has a very major impact on how well that company performs,” adds Conway.
Newer businesses lead the way
In order to make a difference, larger and more established organisations should look to newer players as it is these brands that are leading on innovation, says Conway. They are able to set new boundaries in terms of expectations because they don’t have to deal with legacy processes and because they have different operating models and ways of working that allow them to be more flexible and creative, and get much closer to the customer.
“Eight years ago if you were the best firm in your sector it was good enough, people would bring their custom to you. But now expectations are set by the best experience people have in other aspects of their lives. Therefore we tend to come to a company with a certain expectation that they are often unable to meet,” explains Conway
It’s something which US brands are much better at doing, according to the research, which finds British firms are between three and five times worse at delivering customer experience excellence than their transatlantic counterparts.
“If you look at the Fortune 500, well over 30% of them have restructured themselves around the customer, either around specific customer needs or around particular segments. In the process they have started to think less about product and more about the circumstances of their customer, trying to identify unmet needs which is driving their approach to innovation,” says Conway.
“We’re not seeing that in the UK. There are not many companies that have changed from the traditional hierarchical Victorian structure to something that is more akin to the way customers buy.”