Listen: Next in Tech | Episode 54: Quantifying Digital Customer Experience

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Eric Hanselman

Welcome to Next in Tech, an S&P Global Market Intelligence podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Principal Research Analyst for the 451 Research arm of S&P Global Market Intelligence.

And today, we will be discussing the quantification of customer experience with Sheryl Kingstone who is the Research Director for our customer teams. Sheryl, welcome back to the podcast.

Sheryl Kingstone

Thank you. Glad to be here.

Eric Hanselman

Well, great to have you back. You've been doing some interesting work in quantifying customer experience. And for some of the recent work we've been doing, you integrated that with The Global Unified Commerce Forecast. So what came out of that fusion?

Sheryl Kingstone

Yes. So we've been doing this for a couple of years now, and it was a brainchild that we had a couple of years ago on a global basis, and now we're tying it to our VoCUL, which is Voice of the Connected User Landscape data. So we have these 2 products, one is called The Global Unified Commerce Forecast that really tracks what consumers are doing as it relates to mobile transactions and also digital transactions and where that is going.

And then we use that to also correlate with survey data around the consumer experiences. So what they've done based on action of buying certain items across the year. And so by doing that, we're able to then articulate the dollar value of either incremental revenue or friction points within the customer experience. And all of that ties up to way we're able to quantify.

So last year, we were able to quantify around $222 billion in North America, and we reviewed that at our Nexus conference. And then this year, it's actually increased. So we're quantifying over $300 billion in revenue lift or friction points with respect to everyday use of technologies and what businesses can do to improve the overall customer experience.

Eric Hanselman

So you're covering a pretty large swath of the market transactions and a lot of the value that's changing hands there.

Sheryl Kingstone

Yes, and that's in North America. One time, we were able to leverage some global data, which we haven't adjusted and it became a $1 trillion opportunity.

Eric Hanselman

So as part of this whole process, I mean, you've identified a number of different consumer personas and you've really characterized what they are, how they go about, what their interactions look like. How did they differ in their expectations and their preferences?

Sheryl Kingstone

Yes, absolutely. And what's really great about it is we have this persona called digitally demanding. And so those are the consumers who truly love to use technologies on a daily basis. It's essential to their lifestyle and how they're really using the technologies in day-to-day purchases or how they're using it in their entertainment factor as compared to digitally delayed, which we consider ones that actually don't really love to use digital technologies.

I mean everyone does use digital in some form today but these digitally demanding consumers are where a lot of the companies are trying to focus, especially in the maturation of delivering these digital experiences. And so that's why it's so important to focus on these consumers that are really requiring things like omnichannel strategies.

Or the fact that what are we doing to bridge the online and in-store gap to encourage more digital experience in the physical locations now that we're back to shopping and how we're going to ensure that revenue lift or what are we doing to engage in a digital world to reduce a lot of those friction points. And we take a look at that.

So for example, when we take a look at digitally demanding as a subset of the overall revenue, [ $88.5 billion ] in revenue losses was specifically for digitally demanding. And then the revenue lift was close to $80 billion too out of the overarching one. So you can isolate what these digitally demanding customers want and where we're creating dissatisfaction in the overall customer journey.

Eric Hanselman

So they're a particularly valuable segment. And not surprisingly, because they're digitally demanding. They're that consumer segment that organizations really need to focus on their technology and capabilities for engagement.

Sheryl Kingstone

Yes. So the way we like to look at it is like, so how do we make that actionable. So the way we look at it is things like convenience strategies. And so when we aggregate up just the convenience strategies, which is about making something faster or easier so that we're reducing friction, it really becomes a foundational element to customer engagement or loyalty and then ultimately that revenue.

So things like offering flexible alternatives to buying out of stock in a digital world and shipping that home. Another convenience that everyone started to get to know to what are we doing on mobile order ahead or curbside pickup that's removing that friction across the customer journey. So all of these are just assets around convenience factors.

But then if you take a look at other things like context, what are we doing to make sure that we're providing contextual information at point of sale. That's where a lot of personalization and knowing your customer and harnessing the power of the data from past purchases and browsing behavior can actually influence at least $50 billion there. So context and personalization is absolutely critical.

And then when we do take a look at things like control, this is really essential too because it really is that third leg of understanding how we're going to improve the overall experience and a lot of control comes to do with how much they want to have with respect to that data element or the fact that they are putting more of the emphasis on understanding their preferred payment at checkout.

There are so many different ways we can empower control, whether it be around preferences, whether it be at the right time that you're engaging or the fact that you're not giving them alternatives such as what's very hot right now, which is buy now or pay later or even things like Apple Pay and some of these digital transaction platforms.

Eric Hanselman

Well, in fact, we were talking with Jordan McKee just a couple of episodes ago about the extent to which organizations are starting to actually bring more of the payment process internally into the applications that they're actually delivering, starting to integrate it.

Whereas in the past, that the whole selling motion was something where they'd say, "Oh, and now we're going to send you out to our credit card processor, whoever our processor happens to be, and then bring it back in." Now it has to be more integrated. As you are identifying, we need to ensure that, that whole flow to final click is actually smooth.

Sheryl Kingstone

Yes, absolutely.

Eric Hanselman

But as part of that, there are a lot of opportunities to now take advantage of the actual sales process itself with alternative means of purchase. You were saying payments over time, all these other integrated pieces that can start to help offer alternatives.

Sheryl Kingstone

Yes. That area has skyrocketed, the whole buy now pay later, it floored me on how fast the pickup was on that. And it is a fantastic not only control factor for the consumer, but a convenience factor.

Eric Hanselman

Well, again, one of these things where once the expectation gets set that this is what the options are, the fact that, that option doesn't exist in one particular retail experience must stand out like a tremendous glaring omission when you start getting to a point at which those digitally demanding customers expect that same level of optionality of seamlessness for every transaction.

Sheryl Kingstone

Yes, absolutely. And it's not just online. So for example, in store, not offering consumers preferred payment methods in store was around $15 billion, when shopping with merchants across borders, $20 billion and then another cumulative effect there online up to about $48 billion in revenue loss just in 6 months.

Eric Hanselman

Yes. This really seems to extend the idea of omnichannel or at least sort of what my understanding had been, which was that you want to meet your customers in whichever mode they want to engage, you need to ensure that you've got vehicles that exist in all of these different engagement models.

But what I'm hearing you say is that, in fact, the experience in all of these channels has to be equivalent and that, in fact, you need the ability to mix and match. You're talking about being in store, but being able to get stuff delivered, if it's out of stock, being able to cross over much more seamlessly between these different channels and to ensure that the experience is synchronized across all of them.

Sheryl Kingstone

Yes, absolutely. And it's not just about convenience and shopping. They're willing to pay a higher price for it. So the other thing that came out in this report is if you look across different things like clothing and fashion or quick service restaurants, even general retail and grocery, they're willing to pay a higher premium, depends on what the value is there.

If they have the option for things like in clothing and fashion, a quarter over quarter preordering items for curbside pickup, they're willing to pay more for it, right? Touchless checkout. The ability to have your mobile app schedule a pickup or order ahead, again, another 25% willing to pay a premium for it.

And then just in grocery, we have to improve just the simple and fast checkout, huge. So roughly anywhere 25% of the people themselves are going to pay a higher price. You think, well, it's only 25%, but that's a premium. When we add in people that just are expecting it, which is the bulk of it, you're getting at 75% of the market is really wanting these new unique experiences.

Eric Hanselman

That's fascinating because that's an area that I expect there to be some real price sensitivity. And the fact that you've got 1/4 of the respondents saying that they willingly pay a premium for this enhanced service, I mean that's kind of mind boggling. That is fascinating data.

Sheryl Kingstone

Now let's look at digitally demanding, and it goes up to 50%. Right. So 46% of digitally demanding consumers are willing to increase their spend at a store for a more personalized experience. They want things like the mobile devices to have individual preferences and being able to control that experience.

They want to be able to check in-store inventory and product information and tie that to their loyalty points, and they even want to pre-book an appointment to receive that recommendation. So the digitally demanding one, which is what we were talking about earlier, in general, are even twice as more demanding as the overarching one.

Eric Hanselman

And so what that says is that not only is this a singularly valuable consumer segment, but it's a consumer segment that is willing to go for premium services at the same time to get those various services or to get the digital extras that they see as valuable.

Sheryl Kingstone

Correct. Absolutely.

Eric Hanselman

So that really says for the end business, here's the segment that not only should you be focusing on, but can also help to go pay for a lot of those technology enhancements to make that interaction more fulfilling. Wow, the takeaway seems to be, geez, why not build it because you're going to attract that segment that's valuable and it's a segment in fact, that can help fund that transition.

Sheryl Kingstone

Absolutely. So yes, it's about cross-channel. But let's not forget that it isn't just about revenue streams. It's also around customer service.

Eric Hanselman

So that's something that's interesting. In this edition, you saw an uptick in the preference for live chat. What do you make of it? Is that where you're headed for this?

Sheryl Kingstone

Yes, I was. I was hoping you would pick up on that.

Eric Hanselman

Well, this is also one of those things that we see these transitions in interaction. And that was one of the other things that I thought was fascinating about the report is that you are seeing these really clear and well-defined changes.

Sheryl Kingstone

Absolutely. I mean, I've been doing this for a couple of decades now, Eric. I know we're not [indiscernible] talk about years, but if you really look back to where we were with like web chat years ago, well, now we're talking about live chat with agents, and it's not just about online, and it's finally surpassing e-mail and voice.

And that's where it is all about making it easier to communicate with the business digitally. And so we are seeing a shift to consumer preferences for [indiscernible] that can really streamline. And I want to use a term like both synchronous and asynchronous.

And what I mean by that is it's either real time, meaning I need to talk to you right now, give me an answer, or I'm going to reach out to you, you're going to get back to me on your time. I'm going to get back to you on your time, and we're going to have this overarching flow of communication that might happen in a span of 24 or 48 hours.

And so it isn't necessarily just live chat, but we are seeing options such as in-app messaging and social media, direct messaging where customers do want to open up this direct and open line of communication, but at their preferred cadence.

Eric Hanselman

Well, it seems it gets back to the point that you were making earlier, which is that it's getting that level of interaction, raising it to significant levels of personalization, being able to ensure that all of the context around the transaction is part of that engagement.

Sheryl Kingstone

Which is not great when you've got silos within the organization. So a lot of people are like, "Well, that's customer service. And right now, you're looking to buy something." And we're like, "Yes, I'm looking to get service over something I'm trying to buy. So explain that to me and stop transferring me."

And that's where we have to start breaking down the silos, look at it from the point of view of the customer. They don't care that it's your customer service department that might want live chat and your marketing department might want this and your sales department might want that. It really is all about looking at it from the point of view of the customer and making it easier to engage.

Eric Hanselman

Well, getting to something that looks more like a unified channel as opposed to all these disparate channels.

Sheryl Kingstone

Correct. But what we're doing today is we'll have one group for social media and then we'll have another group of customer service or we'll have another thing that's online for the commerce. And all of this becomes very disconnected when the consumer channel tops.

Eric Hanselman

And you get into those situations where, well, wait a minute, the live chat said this, when I got into the store, this happened. On social media, I called you out on Twitter, and I got this reaction and without...

Sheryl Kingstone

Yes, we all have those experiences, absolutely. And sometimes, the worst part about it is businesses are actually orchestrating it that way. So they are pricing incentives for certain channels, and that's the last thing you really want to do.

Eric Hanselman

So if the business differentiates the value of that engagement based on the channel, they're actually building in some specific bias.

Sheryl Kingstone

Telcos are famous for this, yes. The telco market is very famous. Think multiple purchases. A lot of times, if you were on the online channel, then we'll have one price point and you go into a store, you'll have another price point.

Eric Hanselman

Which gets back to that issue of the last thing any consumer wants.

Sheryl Kingstone

Yes.

Eric Hanselman

Yes. So what should organizations be taking away from these results? I guess we've touched on a couple of these, but what actions should they be taking?

Sheryl Kingstone

The action that I would say comes down to 3 things. One, it really comes down to linking the data and the information across the customer journey so that every department has the right information at the right time. That is foundational.

Now you want to take a look at that digital experience and the in-store experience. And you want to make sure that you're able to, a, bring more digital experiences into the store. And then if you're already in the digital experience, well, we might have to up our game.

We might have to understand how we're making that digital experience a little bit more contextual by tying in-store and online together or where the role of social media is going because that's changing also overnight as it relates to buying with video or buying in different channels. So that really brings in the physical and the digital layers.

And then lastly, make sure that you're putting in place a transparent and executive leadership as it relates to breaking down the silos across the entire department stream. So it's not just about buying and servicing. It really is about understanding those processes across that buying journey.

Eric Hanselman

And really ensuring that you're focused on what that customer experience is and ensuring that you get a consistent experience for the customer, no matter how they interact with you, where they interact with you, what that transaction actually looks like.

Sheryl Kingstone

And remember, we can dollarize it. So it is definitely worth paying attention to, unless you don't care about $1 trillion worth of opportunity.

Eric Hanselman

Well, my suspicion is that most of our audience would be thinking that, that might be worthwhile.

Sheryl Kingstone

I never thought we would too also.

Eric Hanselman

Well, but you also center on what I think is one of the pieces that, of course, will be near and dear to all of the Next in Tech audience listeners, which is that data integration piece.

And that, I don't know how many times we keep coming back to the point that you've really got to be able to have the ability to get data, where it's needed, when it's needed and without encumbrance. But -- and Paige Bartley would want me to ensure that we say this with all of the appropriate protections on it at the same time.

Sheryl Kingstone

Absolutely, goes back to control. Remember, when I talked about convenience, context and control, control is absolutely essential. The data is absolutely central too and giving the right information at the right time in the right format to your business users is essential.

And some other data I might have that we can discuss at another point, Eric, has to do with the persona that I have around CX data driver versus a CX data drifter. The data drivers are the ones that are really using this technology, and they're able to deliver differentiated experiences as compared to their counterparts that are really not focusing on the data as effectively as they can and they're not really delivering the results for the end customer.

Eric Hanselman

That sounds like lead into another podcast episode.

Sheryl Kingstone

Absolutely.

Eric Hanselman

Well, we will definitely have you back to cover that because these are ideas -- the data usage persona is also, I think, are fascinating. But again, well, a whole another episode we can put together with that. Well, thank you very much, Sheryl. This has been great.

Sheryl Kingstone

Love talking about this. It really is important for businesses to understand how they can make and improve the overall customer experience for their customers as satisfying as possible.

Eric Hanselman

Well, and the takeaway and the points that you're making that this is -- it means that they get a better -- they get better binding with a clientele that are willing to pay for better binding. Everybody wins, right?

Sheryl Kingstone

Absolutely.

Eric Hanselman

Well, many thanks, and that is it for this episode of Next in Tech. Thank you to our audience for staying with us. We hope that you will join us for our next episode where we'll be having a panel discussion about Web3, NFTs, crypto, all manner of interesting and wildly overhyped subjects now that we've ever covered too much hype in Next in Tech, but we hope you will join us then because there is always something Next in Tech.