The Rise of the Experience Economy

The rise of the Experience Economy

The 2019 CX Industry Report The Experience Economy is here

The Experience Economy is here. It’s fundamentally changing how companies go to market, influence their buyers, and engage people throughout the customer journey. Experience trumps all else— consumer’s loyalty and dollars go to experiences, not products. The most successful companies will be those that capitalize on this opportunity to differentiate, embracing the latest in technology to put their customer at the center of everything they do.

Experiences are made up of many touchpoints, interactions, and exposures that a consumer has with a brand—its product, service, employees, and market messages across multiple channels—over the duration of the relationship. An experience with a lasting impression builds affinity and equity for the brand and can dictate future buying behaviors and customer loyalty.

The findings shared in our recent CX industry report can help guide companies to adapt to the rise in the Experience Economy, making great experiences a core part of their business offering.

| 02 THE RISE OF THE EXPERIENCE ECONOMY The lines between the products and services people interact with—whether just a few times in their lives or several times per day—and everyday life are rapidly blurring. Companies are challenged with creating experiences that likely go far beyond a product’s original purpose.

Buying a cup of coffee, for example, isn’t just about the coffee. It’s about the cup, the layout of the store, the length of the line, the friendliness of the barista, the ability to order ahead and pay with an app—the list goes on. And don’t forget about what happens behind the counter—that’s just as important. How the shop streamlines its ordering process, the systems it uses to process customer orders, its payroll systems, and even how its website and app are designed, managed, and improved all play a part in the overall Experience Economy.

The success or failure of that coffee shop depends both on the quality of the experience it provides and how effectively it manages its business internally. Everything from the taste of the coffee to the accounting software they use will determine their ability to keep up with the ever-changing needs and demands of customers and technology.

In the past, customer-centric companies have reaped the rewards of making CX a priority. According to research by Forrester, companies that are rated as CX leaders outperform based on both stock price and ROI when compared to the S&P 500 and significantly outperform when compared to companies with poor CX.

Today, earning the benefits of great CX depends on a more holistic approach that seamlessly connects a brand with its customers at every touchpoint—and behind the scenes. Thriving in the Experience Economy will be directly tied to companies that achieve these goals.

| 03 THE RISE OF THE EXPERIENCE ECONOMY Methodology

In this sixth annual Customer Experience Industry Survey, we asked over 1,600 professionals across a wide variety of industries how their organizations are approaching customer experience and conducting CX research. 1,600

The survey was divided into sections based on respondent job role, plus a set of general questions asked of everyone.

Three key themes stood out this year:

• Digital transformations are off to a slow start

• CX trends don’t reflect current customer needs

• Scaling customer research is more important than ever

| 04 THE RISE OF THE EXPERIENCE ECONOMY Digital transformations are essential—but slow to start

The concept of digital transformation has been around for a while in some form or another. Back in the late 1990s and early 2000s, some might’ve referred to the process as simply “digitizing” or “computerizing.”

Fast forward to today, and the scope of these initiatives has dramatically widened. As our world becomes increasingly driven by digital interactions, companies are constantly challenged not only to keep up with the pace of customer expectations but to continually leverage the right tools, resources, and processes to work efficiently and stay competitive.

| 05 THE RISE OF THE EXPERIENCE ECONOMY Ask any enterprise CEO or top management consulting firm what their top priorities are for the next several years, and digital transformation will likely be on that list. In fact, management consultancies are so invested in the idea that many have dedicated divisions that focus solely on digital transformation, like McKinsey Digital, Deloitte Digital, and Accenture Digital, just to name a few. That focus makes sense when you consider that, according to market intelligence firm IDC, enterprises are expected to spend more than $2 trillion to transform digital experiences by 2022. Yes, trillion.

Yet when asked how their company was progressing with its digital transformation journey, UserTesting’s study revealed that 44% of respondents have either never heard of digital transformation or aren’t engaging in it at all. Another 34% noted that they’re in the process now, with just over 20% reporting a successful digital transformation.

16% not doing it

22% done

28% don’t know what that is

34% in process

| 06 THE RISE OF THE EXPERIENCE ECONOMY Despite all the excitement and investment in digital transformations, they’re not without their challenges. Many companies struggle to define their digital transformations, including how long it takes and what it involves. According to research by McKinsey, 70% of digital transformations fail to reach their goals. That’s a sobering statistic considering that some of those failures happened at a few of the world’s most respected brands—GE, Nike, and Proctor and Gamble, just to name a few.

Add to that the fact that digital transformation has become a buzzword over the years, with some companies claiming to be committed to transforming their organizations on paper, yet never going all-in. As a result, when digital transformations are discussed, the definition and scope can vary wildly between organizations and individuals and misconceptions about the process—and purpose—abound.

70%of digital transformations fail to reach their goals

| 07 THE RISE OF THE EXPERIENCE ECONOMY Digital transformations aren’t just digital

One key misconception is that digital transformations are focused strictly on all things digital. While we use the term, “digital” today, the reality is that the necessary transformations encompass much more than that.

Digital transformations require companies to rethink how they run their businesses. It involves everything from using technology to modernize legacy business processes—remember when everyone was switching to paperless systems?—to adopting more efficient approaches to product management. Salesforce sums up the breadth and complexity nicely:

Digital transformation is the process of using digital technologies to create new—or modify existing—business processes, culture, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation.

When you take this definition into consideration, it’s understandable to feel a little overwhelmed. There’s a lot involved in a digital transformation that leads some to believe it’s more of a constant process rather than something to achieve.

| 08 THE RISE OF THE EXPERIENCE ECONOMY Digital transformation’s slow start doesn’t mean it’s a nonstarter

At first glance, UserTesting’s findings appear to indicate that companies might be slow to kick off their digital transformations. But on closer inspection, those numbers might not tell the whole story.

If, as Salesforce notes, digital transformation is all about a company meeting the ever-changing needs of consumers and markets, then it’s helpful to think about digital transformation as an ongoing, evolving process, rather than a task to be completed.

In an article for the Harvard Business Review, authors Thomas H. Davenport and George Westerman sum up the breadth and scope of change companies face when embarking on a digital transformation:

...digital is not just a thing that you can buy and plug into the organization. It is multi-faceted and diffuse and doesn’t just involve technology. Digital transformation is an ongoing process of changing the way you do business. It requires foundational investments in skills, projects, infrastructure, and, often, in cleaning up IT systems.

| 09 THE RISE OF THE EXPERIENCE ECONOMY Digital transformation is essential for companies to keep up with the rapid pace of industry and consumer change. It requires commitment and a shared understanding of goals from everyone within an organization. Most importantly, digital transformations require companies to embrace the urgency of keeping pace with a rapidly changing market, while at the same time, acknowledging that their transformation is more like an evolution.

Organizational transformation—today, it’s digital; five years from now it could be AI—is a constant state of change that will be the new normal for customer-centered companies. Those that shy away from transformation—or don’t start soon—risk being left behind as their competitors evolve.

| 10 THE RISE OF THE EXPERIENCE ECONOMY Experiences aren’t trends

Deciding what products to develop will always be a bit of a moving target. Industry trends and hype may have many thinking that technologies like artificial intelligence (AI) and gesture-based interactions, for example, are the wave of the future and worthy of a sizeable investment. While that may be true years down the road, it probably isn’t true now.

What the industry and consumers are excited about for the future often differs from what they need in the present. So while it may seem that consumers can’t wait to drive their cars with the sound of their voice, the reality is that they’re still driving themselves around and responsible for following traffic laws. It’s tempting to get wrapped up in emerging technologies, but spend too much time and resources on them and you risk leaving customers feeling abandoned.

| 11 THE RISE OF THE EXPERIENCE ECONOMY Good today, gone tomorrow

Our study reflects this as we explore future trends versus current needs. Each year we ask respondents to rank which trends they think will make the most impact in the next five years. This year, we also asked what they focused on most in the past year.

AI was a top trend to watch in the next five years. However, when we looked at what people focused on in 2018, it was at the bottom of the list. Tablets, on the other hand, were a key technology focus in 2018, yet suffered a sharp decline when looking ahead five years.

The inverse nature of these trends highlights annual fluctuations in consumer interest and the impact fads can have on technology adoption. Omnichannel experiences were projected to be a major trend in our 2017 survey, but by 2018 they were considered one of the least important. And now, in 2019, omnichannel is one of the few trends that respondents noted as equally important now and in the coming five years.

So what’s the lesson here? Should companies focus on what consumers are using right now and pivot if trends change? Or should they start researching how to accommodate for whatever might be coming next?

The answer, as you might’ve guessed, is both.

| 12 THE RISE OF THE EXPERIENCE ECONOMY What were the most important trends affecting CX in 2018, and in the next five years?

AI IoT Tablets Wearables Smartphones Accessibility Omnichannel Globalization Touch interfaces Design Thinking Voice interaction

Digital transformation Multi-device interaction Virtual/augmented reality Gesture-based interaction

Very important in 2018 Very important in next five| 13years THE RISE OF THE EXPERIENCE ECONOMY Customers are the most important trend to watch

Every day, consumers are exposed to better, more seamless, and personalized experiences—both digitally and in person. Every great experience raises the bar for the next. To stay relevant to customers, both this year and in the future, companies must keep their fingers on the pulse of consumers’ ever- changing needs and expectations and continue to iterate and optimize their offerings.

No matter what some market research may indicate, the only thing that really matters is what matters to your customers. If you already include human insight as part of your product development lifecycle, then you’re in a great position. You can quickly leverage that insight to make informed decisions about what to build and when—and stay on top of trends in consumer behavior.

If gathering fast customer feedback isn’t yet part of your organization’s strategy, now is the time to make it a priority. We won’t go so far as to say that it’s never too late to start, however. The reality is that every company that does rely on customer insight will quickly become a competitor, no matter what they offer.

| 14 THE RISE OF THE EXPERIENCE ECONOMY I struggle to produce quality To scale, or not to scale, work at the the pace of Agile development there is no question

As customer expectations for seamless experiences grow, so do the demands of every team that touches the customer experience.

Gathering human insight through customer feedback is the best way to do this, yet many teams must do so without the help of skilled researchers. Designers, for example, noted that 66% of 62% projects they work on don’t receive any user research help, and Designers agree 40% reported that they never have access to user researchers.

Of designers, 62% felt that the speed of the Agile development process impacted the quality of their work, while 42% of researchers noted that they struggle to keep up with this pace.

Companies aren’t likely to change their development processes anytime soon, so the question becomes: “How can teams produce their best work under such a demanding pace?” 42% Researchers agree

| 15 THE RISE OF THE EXPERIENCE ECONOMY I want to empower more teams Empower every team to conduct customer research to “own” CX

At UserTesting, our experience has shown that the best way to meet customer needs and expectations quickly and with the highest quality, is to scale customer feedback, making human insight available to everyone across the organization, whenever they need it. 70% Researchers agree Organizations are already primed for scaling customer research, considering that so many–40%–feel that everyone in the organization “owns” CX.

Not surprisingly, researchers are vocal supporters of empowering everyone in their organization to conduct their own research. The vast majority of researchers surveyed–70%–want everyone empowered to gather customer insights.

Executives were also strong supporters of scaling customer research, with 86% stating that it’s a priority. 86% Executives agree

| 16 THE RISE OF THE EXPERIENCE ECONOMY Always be scaling

Human insight is the most important piece of the customer experience puzzle, and it’s something that nearly every team needs in its arsenal of resources. Establishing a scaled approach to conducting customer research not only frees up experienced researchers to focus on other strategic initiatives, but it also empowers everyone in the organization to put themselves in the shoes of their customers and lead with a customer-centric mindset.

Scaling customer research connects every team directly with the customer, helping bridge the empathy gap between our digital worlds and the people behind the devices. Companies become truly customer-obsessed when they empower the entire organization to better understand their customers through research.

| 17 THE RISE OF THE EXPERIENCE ECONOMY Transforming experiences

Technologies—and how we interact with them—will change. Development processes will evolve, and no doubt, how we describe all these things will continue to take on new meanings. Perhaps the The only only other constant that exists, at least when it comes to creating great experiences, is the customer. constant As humans, one of the most meaningful ways we measure our lives is through our experiences. While we can reach the ends of our lives and tally up the years lived, awards won, or any other metric, it’s in life is more often how a life was lived that captures our hearts. change. Technology will continue to advance in ways we probably haven’t thought of yet. It can be overwhelming to think of it that way—how can we prepare or plan for experiences we can’t yet imagine? —Heraclitus, Greek philosopher

| 18 THE RISE OF THE EXPERIENCE ECONOMY And therein lies the answer. It’s the experience that matters— your customers’. Remember that it’s never just about how that cup of coffee tastes anymore. It’s about everything a customer experiences leading up to ordering that cup of coffee and the interactions and how they feel afterward.

How that cup of coffee is delivered—through a vending machine, drive-through, or teleported right into their hand—is less important than how the customer feels after they’ve finished their cup. It’s the experience that they’ll remember—and is what ultimately influences customer loyalty.

While it’s impossible to predict what technologies will be in our hands a decade from now, there’s little doubt that how customers feel about those experiences will be a crucial element of a company’s success. The Experience Economy is here. How a person experiences an interaction—digital or otherwise—will decide which companies thrive in this ever-changing economy.

| 19 THE RISE OF THE EXPERIENCE ECONOMY About UserTesting

UserTesting enables every organization to deliver the best customer experience powered by human insight. With UserTesting’s on-demand Human Insight Platform, companies across industries make accurate customer-first decisions at every level, at the speed business demands. With UserTesting, product teams, marketers, digital and customer experience executives confidently and quickly create the right experiences for all target audiences, increasing brand loyalty and revenue. UserTesting has over 1,200 subscription customers, including 48 of the top 100 brands in the world and has delivered human insights to over 35,000 companies to date. Backed by Accel and OpenView, UserTesting is headquartered in San Francisco, CA. To learn more, visit www.usertesting.com.

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