Customer and shopper experience management

Abstract

The customer experience originates from a set of interactions between a customer and a product, a company, or part of its organization, which provoke a reaction. This is strictly personal and implies the customer's involvement at different levels (rational, emotional, sensorial, physical, and spiritual). Customer experience construct is holistic in nature and involves the customer's cognitive, affective, emotional, social and physical responses to the retailer, because this definition is the latest and much relates to retail. Customer experience includes three dimensions, that is, Sensory Experience, Emotional Experience, and Social Experience. Six factors have an influence on the experience of customers in large retailing stores: Multi-store shopping - shopping in different stores instead of buying all items in one particular store; Bigness and confusion - big companies, extensive product choice, and overwhelming product assortment are seen as confusing by some customers; Personal interaction and personalized service - large stores are seen as impersonal, cold, lacking of personal interaction by some customers; Customer recognition by staff; Prevalence of mistakes and price discrepancies; Unused checkout lanes have a negative impact on the experience.

Headnote

Abstract

The customer experience originates from a set of interactions between a customer and a product, a company, or part of its organization, which provoke a reaction. This is strictly personal and implies the customer's involvement at different levels (rational, emotional, sensorial, physical, and spiritual).

Customer experience construct is holistic in nature and involves the customer's cognitive, affective, emotional, social and physical responses to the retailer, because this definition is the latest and much relates to retail. Customer experience includes three dimensions, that is, Sensory Experience, Emotional Experience, and Social Experience.

Six factors have an influence on the experience of customers in large retailing stores: Multi-store shopping - shopping in different stores instead of buying all items in one particular store; Bigness and confusion - big companies, extensive product choice, and overwhelming product assortment are seen as confusing by some customers; Personal interaction and personalized service - large stores are seen as impersonal, cold, lacking of personal interaction by some customers; Customer recognition by staff; Prevalence of mistakes and price discrepancies; Unused checkout lanes have a negative impact on the experience.

Keywords: customer experience, interpersonal factors, non-interpersonal factors, customer experience management, consumer buying decision, shopping experiences

JEL Classification: M14

1. Introduction. Experience economy

The concept of Customer experience was firstly conceived in the mid-1980s when Holbrook and Hirschman (1982) introduced a new experiential approach to consumer behavior domain. Despite these initial works, the concept of Customer Experience came to be one of the main streams of research in the late 1990s with Pine and Gilmore's book on the Experience Economy (1999) and Schmitt's book on Experiential Marketing: How to Get Customers to Sense, Feel, Think, Act, Relate to Your Company and Brands (1999). Hence, a number of studies since 1999 have tried to define Customer Experience. Just as the study by Gentile et al. (2007) stated, "The customer experience originates from a set of interactions between a customer and a product, a company, or part of its organization, which provoke a reaction. This is strictly personal and implies the customer's involvement at different levels (rational, emotional, sensorial, physical, and spiritual)" (Gentile et al., 2007). Moreover, Meyer and Schwager (2007) point out that customer experience is the internal and subjective response customers have to any direct or indirect contact with a company. After all, we would adopt the definition provided by Verhoef et al. (2009), which is that customer experience construct is holistic in nature and involves the customer's cognitive, affective, emotional, social and physical responses to the retailer, because this definition is the latest and much relates to retail (Figure 1.).

On the other hand, Schmitt (1999) proposes five experiences: sense, feel, think, act, and relate. The sense experience includes aesthetics and sensory qualities. The feel experience includes moods and emotions. The think experience includes convergent/ analytical and divergent/ imaginative thinking. The act experience refers to motor actions and behavioral experience. The relate experience refers to social experience, such as relating to a reference group.

According to the definition given by Verhoef et al. (2009) and the five experience proposed by Schmitt (1999), customer experience include three dimensions, that is, Sensory Experience, Emotional Experience, and Social Experience. Sensory Experience refers to the aesthetics and sensory perceptions about the shopping environment, atmosphere, products and service. Emotional Experience includes the moods and emotions generating during the shopping trip. Social Experience emphasizes the relationships with others and society.

Furthermore, many studies show that consumers shop generally for hedonic goals and utilitarian goals, which would bring consumers positive emotions (Babin et al., 1994; Jones et al., 2006). Via factor analysis, Ibrahim and Wee (2002b) have proven hedonic-orientated goals and utilitarian-orientated goals are important factors influencing customer experience. Hedonic-oriented goals refers to the pursuit of fun and enjoyment rather than pure task completion, while utilitarian-oriented goals have been described as task-related or some type of conscious pursuit of an intended consequence (Babin et al., 1994).

In a service environment, Grove and Fisk (1997) discovered that the presence of other customers has an impact on one's own experience. For instance, if other customers are friendly and children are around, customers typically enjoy a better experience in a service encounter. Jones (1999) focused on shopping, defining an experience as "entertaining", based on factors that are "fun" and "pleasurable". He discovered the following "customer factors": Social factors, e.g., shopping with family and friends; Task factor, e.g., searching for a Christmas tree in autumn; Time factor, e.g., having enough time to shop; Product involvement, e.g., whether a customer for computers is interested in technical features; Financial resources, e.g., having enough money to spend.

In addition to the factors above, Jones defined "retailer factors". These are as follows: Retail prices; Selection, e.g., store offers a unique selection of items; Store environment, e.g., animals and exotic plants in a store; Salespeople, e.g., friendly, silly.

Overall, Jones concluded that all nine factors have an impact on (entertaining) shopping experiences. The researcher adopted a questionnaire approach, where respondents completed open questions.

This form of questioning allows respondents to express their views on customer experience, but assumes that respondents are consciously aware of what makes an experience 'fun' and 'pleasurable'. It also assumes that respondents have the time and the motivation to articulate their feelings in detail, so that answers can be analyzed by the researcher.

Being aware of the limitations of applying a structured questionnaire to a complex issue such as customer experience, Marganosky and Cude (2000) settled for a focus group approach in the US retail context. They discovered six factors that have an influence on the experience of customers in large retailing stores: Multi-store shopping - shopping in different stores instead of buying all items in one particular store; Bigness and confusion - big companies, extensive product choice, and overwhelming product assortment are seen as confusing by some customers; Personal interaction and personalized service - large stores are seen as impersonal, cold, lacking of personal interaction by some customers; Customer recognition by staff; Prevalence of mistakes and price discrepancies; Unused checkout lanes have a negative impact on the experience.

The last point, 'unused checkout lanes' is interesting and was the subject of several studies (e.g., Groth and Gilliland, 2001 and anonymous, 2004). These studies have shown that the waiting time and waiting procedure have an impact on customer experience in a service environment. Arnold et al. (2005) conducted another US retail study and by applying a standard interview technique, they discovered the following factors:

- Interpersonal Factors (Salesperson): Interpersonal effort (helpful vs. unhelpful); Interpersonal engagement (friendly vs. unfriendly); Problem resolution (willing to go outside of rules vs. would not go outside of rules); Interpersonal distance (not too pushy vs. very pushy); Time commitment (took time vs. took no time); Lack of skills and knowledge; Dishonesty.

- Non-interpersonal factors - Product: Unanticipated acquisition (found exactly the right product); Lack of expected acquisition (could not find the product); Unanticipated value (price / bargain); Lack of expected value (price too high); Lack of technical quality (product did not perform to expectations); Bad atmosphere.

Customers have options about how to deal with a company and Boyer and Hult (2006)7 devoted their research to investigate online purchases. The authors predefined the following factors: Product quality; Service quality; Product freshness; Time savings; Behavioural intentions.

Boyer and Hult opted for a Web survey and an email research method and argued that all factors have an effect on customer experience, albeit to various degrees. This study represents the latest approach in exploring the topic. Before leaving this example behind, it is worth pointing out that the authors recognised a) product quality and service quality cannot be ignored when defining customer experience, and b) customers can have an experience in an online environment. In other words, the multi-channel environment might give shape to the experience of customers. The literature that centres on a multi-channel environment argues that four issues are crucial in achieving a great customer experience:

- Personalisation - the company knows the name of the customer and the historical background of the relationship irrespective of channel;

- Customisation - the company is able to offer a tailor-made solution to the customer's problem;

- Consistency - the experience is consistent over time, regardless of the channel used;

- Channel choice - the customer has either the option to select the appropriate channel or is steered towards a particular channel when dealing with a company.

The constructs above are suggested by the literature - and this is based entirely on theoretical grounds. However, the impact of the factors on customer experience has never been subject to an empirical investigation.

2. Staging Experiences that Sell

An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event. Commodities are fungible, goods tangible, services intangible, and experiences memorable. (Table 2). While prior economic offerings - commodities, goods, and services - are external to the buyer, experiences are inherently personal, existing only in the mind of an individual who has been engaged on an emotional, physical, intellectual, or even spiritual level. Thus, no two people can have the same experience, because each experience derives from the interaction between the staged event (like a theatrical play) and the individual's state of mind.

3. Major Factors Influencing Consumer Buying Decision Process

The Brand Experience

The customer comes to a retailing environment with perceptions about two types of brands: the retail brand (e.g., Starbucks, Mc Donald's) and the manufacturer or service brand that is sold in the retail stores (Figure 5).

The Price Experience

A lot rides on how a retailer sets its prices. The three other P's create value for the seller; the fourth P of price captures value. In addition, this is the only P that earns revenue for the retailer. When retailers price a product or service too high, consumers view it as a poor value and will not buy. A price set too low may signal low quality, poor performance, or other negative attributes about the product or service. Although setting the "right" price is clearly an important retailing task, it is often treated as an afterthought, partly because it remains the least understood and therefore most difficult to manage task.

The Promotion Experience

Consumer promotions also take several forms, including price promotions, loss leaders, and in-store displays. Meta analyses show that the immediate increase in sales of a promoted item is substantial. However, brand switching as a result of consumer promotions is closer to 30-45 percent, far less than previous estimates of approximately 80 percent. A consumer promotion, such as a loss leader, on one item should increase sales of other items and overall profits, yet empirical research in this area is mixed. Consumer "cherry picking" for special prices has a relatively minor impact on retailer profits; they also conclude that not all promotions have a positive revenue impact for retailers though. Rather, the profit impact is decidedly mixed.

The Supply Chain Management Experience

Most of the researchers centers on what happens at the front-end of the retail store, supply chain management occurs at the back end. For decades, retail supply chain and logistics issues seemed somehow less important than other activities such as promotion, pricing, or customer service. But this erroneous perception no longer exists. Supply chain issues, from both the more managerial partnering side and the more technical operations side, have proven important sources of competitive advantage for many retailers, particularly low-cost providers such as Benetton and Zara.

The Location Experience

Retailing academics and practitioners seem always to emphasize "location, location, location" as the key to success. An important research advance could consider the role of travel time on consumers' choices of retail formats and the related retailing implications because consumers value their time, researchers should investigate what it might take, in terms of price savings and deals, to attract consumers to a factory outlet store (normally located some distance away) rather than a similar store in a conveniently located mall. The location decision likely has major ramifications for price, promotion, and merchandising decisions.

The Advertising Experience

Exponential growth in Internet hosts and personal computer adoption has led to dramatic increases in online activity. During the growth process, marketers recognized that the Internet was a medium for reaching millions of potential customers. Since then, marketers have adapted value based advertising strategies to the Internet.

The Packaging & Labeling Experience

Packaging plays a major role when products are purchased. After all, it is the first thing seen before making purchase choices and it is widely regarded that over 50 per cent of purchasing decisions are made at the shelf, or point of purchase. Therefore, packaging which creates differentiation and identity in the relatively homogenous consumer packaged goods industry is therefore highly important.

The Service Mix Experience

Customer service is the ability of an organization to constantly and consistently give the customer what they want and need.

The Atmosphere Experience

Consumer spending behavior can be significantly influenced by the store atmosphere and the customer mood. Customers require a store layout that maximizes the number of products seen within the context of a customers' need for the product. Customers who experience a form of personal control, whether in orienting themselves to the store section they need to go to or in finding the products they want, generally feel good about the store. Good feelings lead to more purchases, especially if products are presented within a display that shows the potential usefulness of the product for them.

4. Seven steps to better customer experience management

Step 1. Understand the needs, wants, and preferences. Key points to consider: the needs and preferences of the target audience change over time; the growth categories change in the industry; differentiate the products and services considering something other than price; the product/service is aligned with market trends; the renewal, up-sell, and cross-sell campaigns are successful.

Step 2. Establish economic frameworks to understand and prioritize impact of marketing, sales, and service decisions. Key points to consider: decide which markets to enter, grow, harvest, and exit; understand performance within the distributed sale model; determine which products and services represent growth categories; determine how much pricing volatility is there in the current product and service portfolio; establish the cost to serve customers using current online and offline support tactics.

Step 3. Track customer behavior, distill patterns, and adapt to accommodate shifts. Key points to consider: current propensity models are able to identify emerging trends that represent growth opportunities; other things beyond seasonality and regional factors are driving changes in purchase patterns; in-store behavior affects online purchase decisions. There is a connection between an abandoned online shopping basket and subsequent purchases, either in-store or online; determine the best ways to target the most profitable customers. Reach the most profitable customer segments; determine the most and least profitable campaigns. Determine if the budget should be spent online or to buy print ads or airtime. Establish how quickly campaign effectiveness erodes over time.

Step 4. Develop lead nurturing and customer management plans for target audiences. Key points to consider: determine how are past customer and prospect lists managed and leveraged by sales acquisition programs and how effective are the win-back campaigns; determine how many times a year does the company communicate with the customer and how many times a year does the company market to a prospect; determine what the optimal contact strategy is for renewing and up/cross-selling customers; determine what the customers, most preferred communications channels; determine how are the most critical touch points in your sales and service life cycle.

Step 5. Develop customer-centric information architecture. Key points to consider: determine how quickly can new information about a customer disseminate through the enterprise?; determine if the information architecture was designed for products and systems, or customers; determine how the information architecture accounts for relationship hierarchy; determine how is categorize customer data (by life cycle events, interactions, or products); determine if the marketing and customer databases are integrated (if so, find what is the unique identifier).

Step 6. Deploy workflow-based tools to marketing, sales, and service stakeholder groups. Key points to consider: determine how well coordinated are handoffs between marketing, sales, and service functions; determine how well the company manages customer escalations and how long it typically takes to resolve, how many are not resolved; determine how lead nurturing is and customer management plans monitored; what tools are in place to facilitate workflow across business functions? Determine how much visibility and control do customers have on service issues through online portals.

Step 7. Create a customer experience map to optimize touch points. Key points to consider: determine who owns customer experience within the company. If ownership is shared, determine who drives customer experience tradeoffdecisions; as business processes are defined, determine what customer experience factors are incorporated into the planning and if they are included in go-to-market gate requirements; determine what percentage of workflows ends up on jeopardy paths; determine how to measure the effectiveness of customer experience delivery; determine if the company drives growth using customer experience as a differentiator.

5. Case study

For a study case regarding Customer Experience Management on a few service providing organizations that are transferring experience to the customer, we propose to follow the next steps:

1. Designing a questionnaire taking in consideration three approaches:

- The approach of Fred Crawford and Ryan Mathews in the book "the Myth of Excellence" (2001). They are proposing as primary and secondary attributes of companies and brand the following: price, device, product, experience, access. We are considering them as axes, as first level criteria in creating a consumer-relevant company, also used by us in the paper "Consumer and Shopper Satisfaction. Measurement of Collaborative Supply Value Chain" (Supply Chain Management for Efficient Consumer Response Conference, 2011)

- The approach of Kamaladevi in the paper "Experience Management in Retailing" where the author considers as major factors influencing consumer buying decision process the following: brand, price, promotion, supply chain management (the relationship with the suppliers of suppliers), location , advertising, packaging and labeling, services, atmosphere;

- The study from School of Management, Cranfield University, "What Makes a Great Customer Experience" by Fred Lemke, Hugh Wilson and Moira Clark, considering the following customer factors: Social factors, e.g., shopping with family and friends; Task factor, e.g., searching for a Christmas tree in autumn; Time factor, e.g., having enough time to shop; Product involvement, e.g., whether a customer for computers is interested in technical features; Financial resources, e.g., having enough money to spend. In addition to the factors above, are also defined retailer factors. These are as follows: Retail prices; Selection, e.g., store offers a unique selection of items; Store environment, e.g., animals and exotic plants in a store; Salespeople, e.g., friendly, silly.

2. After analyzing the criteria and combining the three approaches mentioned above, we generated a questionnaire with four hierarchic levels for 98 attributes determining the relationship of the organization providing the experience with the client capitalizing his own experience. The attached questionnaire (Appendix 1) has been applied to students and master students from business specialties (Marketing, Management, Management of Tourism and Service Organizations). They answered by giving a level of importance (hierarchy) to the attributes mentioned above (1 as the lowest value and 100 as the highest). This stage is completed by reducing the number of attributes (eliminating the ones with the lowest scores).

3. The final step consists of creating a questionnaire regarding the level of maturity (Scorecard) for 2 organizations from the same domain of activity (restaurants, supermarkets, HBC departments, IT departments, phone companies). These organizations will be analyzed with a benchmarking and in relationship with the organization that provided the best experience during the client's life.

The last two stages mentioned above and the results of the study will be presented in future papers.

References

References

Castellanos, T. & Co. (2011) Seven steps to better customer experience management. Improving customer management to drive profitable growth, kpmg.com

Crawford, F., Mathews, R. (2001) The Myth of Excellence, New York

Kamaladevi, B., Customer Experience Management in Retailing, The Romanian Economic Journal, XII, no.34, (4) 2009

Lemke, F., Wilson, H., Clark, M. (2013) What makes a great Customer experience? Cranfield University, School of Management

Meyer, C., Schwager, A. (2013) Understanding Customer Experience, HBR, Zurich HelpPoint

Pine II, B. J., Gilmore, H. J. (1998) Welcome to the Experience Economy, HBR, July-August

Pine II, B. J, Gilmore, H. J (1999) Welcome to the Experience Economy: work is theatre and every business a stage, HBR

Thompson, B. (2006) Customer Experience Management: Accelerating Business performance, Part 2 of 2, crmguru.com

Thusy, A., Morris, L. (2004) From CRM to Customer Experience: a New Real for Innovation, Business Digest, Paris, January

Verhoef, C. P., Parasuraman, A. & Co (2009) Customer Experience Creation: Determinants, Dynamics and Management Strategies, Journal of retailing 85 (I, 2009), ELSEVIER

Westenberg, E. & Co. (2010) The Future of Retail Touchpoints. Extending your Reach in the Consumer Shopping Journey, CISCO, Cisco Internet business Solutions Group (ISBSG)