Customer experience – what’s going wrong?

Rowan Jackson

In an article in The Spectator on 9th March, Martin Vander Weyer forecast the next mis-selling scandal. He pointed out that the Financial Conduct Authority (FCA) has been targeting St James’s Place Wealth Management (SJP) for its opaque fee structures and poor service. The company has set aside £426,000,000 for potential refunds to customers and has been pushed into a pre-tax loss for 2023. The Sunday Times has been chasing SJP for seven years and the journalist asks how many other wealth managers have been overcharging for poor advice and providing poor service.

On 20th March in an article in CITY AM, the Chief Executive of the FCA, Nikhil Rathi, said the FCA are tightening the new rules on Consumer Duty. The Daily Telegraph recently published an article pointing out that customer service is on the decline.

In May 2023, McKinsey showed that those in banking that invest in the customer experience are most likely to have higher profits and a better total return for shareholders than those that do not. More recently, they have asked: Where is Customer Care in 2024, pointing out that: “Customer care leaders are facing their greatest challenge in decades. They must prepare their organisations for an AI-enabled future while simultaneously meeting tough commercial targets and rising customer expectations. Our latest global survey suggests that many companies are struggling on all these fronts.”

What is happening here?

Companies that are successful in creating both a functional and an emotional bond have higher retention ratios (84% vs 30%) and cross-sell ratios (82% vs 16%) compared with those that do not. Most leading chief executives know that the best way to increase profits (and their bonus) is to develop and retain loyal customers. They also know that the fastest way to develop loyal customers is to have an outstanding customer experience (CX) that delivers on customers’ expectations. Many companies have, as a result, hired a raft of people to focus on improving the CX. Larger organisations have an Insight Team which is focused exclusively on this subject.

And yet it’s not working. Why?

Let us dig a little. Maybe the answer is not in the what, but the how.

Changing an organisation’s culture takes a great deal of investment over time. Many organisations profess to be “client-driven” but, as SJP has shown, really are not. Most are financially driven. If you want to identify if your organisation is client driven, ask what the CEO’s bonus depends on. Most are based on profits. When Bernard Fournier was CEO of Rank Xerox he was bonused on customer retention. It made a massive difference to the culture of the company.

Or maybe it is something else?

A private bank wanted to increase the degree of loyalty of its High Net Worth Individual (HNWI) customers. It invested in the creation of a specific team to measure and improve the CX. The goal was to have clients who enjoyed the experience of being a client of the bank so much that they placed more Assets Under Management (AUM) with the bank and referred the bank on to their fellow HNWIs.

The bank knew they had to improve their CX. For years they had been measuring this using traditional satisfaction-based methods: Customer Satisfaction (CSAT) surveys and the Net Promoter Score (NPS). However, these were not working effectively to inform executive decision-making.

What they really wanted to know was:

1. Exactly what their clients expected.
2. Where and what to change. They needed a prioritised list of focused areas for improvement, but lacked a method that provided this diagnostic insight.
3. How well they performed compared to their competitors.

Let’s look at the problems with their approach. Their desired outcome was to build client trust, to develop loyalty and, ideally, advocacy. But measuring satisfaction is the wrong way to go about this. Let’s unpack that.

1. Measuring satisfaction has a number of drawbacks.

a. Ask 20 people to define satisfaction and you get 20 different replies.
b. Customers may say they’re satisfied, but not be loyal and leave at any time.
c. Customers may say they’re dissatisfied, yet not leave, but they’re not loyal.
d. A lack of context – taken in isolation, the response to a question about satisfaction is meaningless. If you don’t know what your clients expect, how can you measure anything?
e. It has been known for decades that satisfaction, as a measure, is not a reliable predictor of trust, loyalty and advocacy, the three outcomes the bank wanted.

2, NPS was created by Fred Reichheld, a Partner at Bain, and has been sold around the world for years. NPS has plenty of fans and an equally large number of critics.

a. Fred himself said it is not diagnostic; it is the same as a Doctor taking a patient’s temperature. The doctor gets a score (38.7) but that does not tell the doctor what is wrong with the patient.
b. NPS uses 3 categories for scoring: Promoters, Neutrals and Detractors. Yet, research has been unable to find any scientific rationale behind these three. The answer: there is none.
c. NPS gives very low value; that is why Volvo gave up using it three years ago.
d. For more insight into NPS, please see promisingoutcomes.com/the-net-promoter-scam-how-nps-is-misleading-your-business

So what can you do?

Instead of using satisfaction-based measures, more demanding organisations are measuring and analysing their customers’ expectations. Knowing what matters most to customers, and how well you’re delivering against those expectations, provides relevance, clarity and deep (actionable) intelligence. It identifies and prioritises areas for improvement, to inform better action and improve the probability of achieving the desired results.

As a bonus, this approach also enables organisations to assess competitor performance for comparison purposes. The bank found this added intelligence extremely useful – one of the reasons was that they’d simply never seen this level of insight before.

Now the CEO has an evidence-based, client-driven way to focus investment on those critical areas that matter to their clients. Or, as he put it: “Real intelligence.”

Would you like to have this intelligence too? Let’s start that conversation now: promisingoutcomes.com/book-a-call