UserTesting Empathy Experience Index (EXi) Report: multichannel retail
The pandemic forced organizations to change the way they do business and deliver experiences to their customers. During this time, customer loyalty has been impacted dramatically and organizations are now in the difficult position of needing to rebuild loyalty among their customer base. One of the most effective ways for companies to do this is through the creation and execution of empathy-driven experiences.
Why read this report
The UserTesting Empathy Experience Index (EXi), a proprietary methodology, launched a multichannel retail EXi survey to 4,500 individuals across 15 multichannel retail brands. In this report, we share the research findings and explain why empathy is the key to building loyalty and its impact on the bottom line. We also examine what the top five multichannel retail brands are doing to drive these empathy-driven experiences. Empathy should be a top-down initiative within organizations.
Chief Executive Officers can use these findings to understand where they should prioritize their investments to achieve higher ROI. Chief Marketing Officers can use this report to understand how their brand scores on empathy across digital and non-digital channels and touchpoints to make optimizations to outreach and engagement strategies. Chief Product Officers can better understand how they can build products and services that drive these empathy-driven experiences to increase adoption and usage. Finally, Chief Experience Officers can use these findings to understand which touchpoints to focus on to drive seamless experiences across all channels.
The evolution of CX
Customer Experience (CX) isn't a new term. However, CX has changed a lot in recent years. If you look back a decade or more, companies that emphasized delivering good experiences to their customers were able to differentiate themselves and gain a competitive advantage. Then, fast forward a few years, and CX had become a focus for anyone trying to compete in the industry, and eventually became something that all businesses began to implement.
This made CX the battleground where businesses tried to outperform one other. Unless organizations delivered exceptional experiences across all channels and touchpoints, it was difficult to gain any type of competitive advantage. And now we find the battleground has evolved yet again, with empathy-driven CX leading the charge. Consumers became loyal to brands they felt were genuinely concerned with their interests and goals. True human-centered practices and customer empathy led to deeper, more loyal relationships with customers.
UserTesting developed the EXi to examine how empathy drives loyalty within brands, helping companies understand their empathy scores overall, within channels and touchpoints, and across their industry.
Among the 15 brands included in the multichannel retail EXi, the top five brands—all scoring in the “Good” category, illustrated three key insights through their focus on customer empathy and loyalty.
Digital touchpoints need to be humanized
The top five brands in the multichannel retail EXi study had an EXi score 3.5 points higher than the bottom ten brands. These brands have been able to create empathy-driven experiences not just across non-digital channels but also within digital channels better than the other brands which lead to higher loyalty. Brands in the top third of the EXi are able to retain their customers, get those customers to spend more with them, and have those customers advocate for them more than the bottom two-thirds of brands. Brands that are able to build loyalty through difficult times will separate themselves from the pack when the pandemic is over.
Look to your existing customers for faster ROI
Studies show that acquiring new customers costs five times what it costs to retain them, making existing customers a natural place to start when it comes to growing your bottom line. The top third of multichannel retailers are able to gain 27% more current spend from customers than the bottom two-thirds. Additionally, the top brands are able to count on 29% more spend in the future than those in the bottom two-thirds.
Customer empathy spans business units
Creating empathy with customers needs to be done across the entire customer journey—from pre-touch to last-touch and in-touch. Not having a seamless empathy-driven experience is no longer an option for organizations. Businesses still work in silos, but customers do not. You need to run your business how your customers see and work with you, not how you’ve traditionally structured and organized the business internally.
Digital touchpoints need to be humanized
Since the onset of the pandemic, multichannel retail brands have had to invest money and time into making digital experiences exceptional. Many companies that had a strategy for digital transformation looking out to the next five to ten years were faced with the massive challenge of doing it in months. Brick and mortar stores shut down and these organizations had to deliver their products and services digitally to survive.
The top five brands in the EXi were able to outperform the competition by almost 3.5 points in digital channels. Additionally, these brands were able to outperform the bottom two-thirds in non-digital empathy by 4.5 points. The human-to-human interaction that's present in non-digital touchpoints enables organizations to better understand customer needs, elicit positive emotional experiences, and build experiences that work. These non-digital touchpoints empower organizations to see their customers walking in their own shoes. These types of human-to-human interactions are not present in the digital space. The call to action for organizations is to humanize digital touchpoints.
Domino’s Pizza uses a chatbot named Dom to enable customers to order food without actually talking to a human. By humanizing this digital experience, Dominos was able to receive over 500,000 orders through Dom in the initial rollout.
Tommy Hilfiger was able to use conversational AI in their chatbot experience by listening for keywords. The chatbot then contextualizes and personalizes the responses.
Other companies are meeting their customers where they are—on social media. Many retailers use Facebook Messenger to deploy conversational AI for their chatbots. These chatbots are able to seem more human by speaking like a human. These chatbots provide customer service, notify customers about the latest product options (enrichment opportunities), help find items, send shipping information, find nearest stores, process orders, assist with in-store shopping, and provide product recommendations.
Some companies have humanized the digital experience by creating a human-to-human connection when a physical item reaches a customer. Zappos has been known to send physical thank you cards to customers. Similarly, with Chewy, when a customer canceled an auto-shipment of dog food for a dog that passed away, they were surprised when the retailer sent a bouquet of flowers to express their condolences. These humanizing touches help create empathy-driven experiences through digital channels.
Look to existing customers for faster ROI
Companies that are able to create empathy-driven experiences across multiple touchpoints are able to gain more loyalty from their customers. When the pandemic first hit, many organizations lost loyal customers because they didn't shift their strategies fast enough to build experiences that worked for customers in changing times. As a result, customers sought out alternative experiences, and the companies that provided more empathy-driven experiences were able to gain loyalty from these individuals. The top brands in the multichannel EXi had significantly higher loyalty scores than the others.
When looking at loyalty within organizations, it is important to think of it in three ways: retention, advocacy, and enrichment.
- Retention loyalty is an organization’s ability to keep its current customers.
- Advocacy loyalty pertains to how likely your customers will be to recommend you to others.
- Enrichment loyalty is how much organizations are able to have their current customers spend more with them on additional product and service offerings.
Most organizations look at metrics such as Net Promoter Score (NPS) or Customer Satisfaction (CSAT) to determine how loyal their customers are to the business. However, when we evaluated the retention and advocacy metrics, we found that although customers were likely to recommend others to the brand, they weren't as likely to keep their existing level of business with the brand. This means that organizations are going to have to spend a lot of money and time to acquire new customers.
Studies have shown that acquisition costs are five times higher than the cost of retaining customers. Additionally, it's much easier to sell to existing customers compared to new customers. Organizations need to keep this in mind when building their loyalty programs. Although all three types of loyalty factored into EXi scores, Retention and Advocacy loyalty proved to have the most impact on driving ROI.
When looking at brands that evangelize retention, you'll see that they create loyalty programs that keep customers coming back. For example, Kohl's loyalty program empowers customers to enjoy loyalty benefits in various channels and touchpoints. This gives customers the flexibility to use rewards in-store or online, letting the customers choose how they'd like to interact with the brand next. The program also includes special features—on top of basics like discount codes and alerting loyal customers of upcoming promotions—like connecting to a digital wallet to make touchless transactions seamless, whether the customer is in-store or online.
Advocacy loyalty is interesting, as it can be high, even if retention scores are low. One of the most common factors impacting consumers' advocacy loyalty is price. Some retailers might see this and assume that simply decreasing prices would improve loyalty, however, that's not necessarily the case. Many customers in the study said they just wanted brands to be transparent about their pricing, noting that trust could easily be broken if they found the same item listed on the manufacturer's website for a lower price. Advocacy is driven by trust, so any perception that brands might not be transparent about their prices could lead loyal customers to look elsewhere.
Nordstrom, for example, does a great job of being transparent about their prices with their customers. If there is a lower price on the manufacturer’s website, the company will state that in their app or on the website, then will automatically match the lowest price.
The top third of multichannel retailers in the study are able to gain 27% more current spend from customers than the bottom two-thirds. Additionally, the top brands are able to count on 29% more spend in the future than those in the bottom two-thirds. These headways give empathy-driven brands a head start that can enrich existing loyalty to drive even faster ROI.
Customer empathy spans business units
Terms like omnichannel and multichannel have become widely accepted over the last few years and many use these terms interchangeably. However, when we talk about multichannel experiences, we mean how organizations are able to sell their products and services through various channels (online vs brick and mortar).
In contrast, omnichannel looks at the experiences customers and prospects have at the various touchpoints across the journey and how the customer experience is delivered at each of those touchpoints. These two terms are used in most industries, but most customers and prospects have no idea what they mean. The way these individuals view interacting with organizations is through one experience. That experience encompasses each and every touchpoint they come across. For this reason, we believe organizations should think about their experience strategy instead of an omnichannel or multichannel strategy. Thinking about it in this way helps to break down those silos organizations have. Each employee tries to see where they fit within the experience and how what they are working on impacts other parts of the experience. This mindset creates a collaborative culture within organizations.
The key drivers of empathy that span the organization pertain to the product/service offering, customer service, pricing and packaging, security, and values. Many parts of the organization touch each of these driver categories.
When someone calls customer service, it's usually because there's some type of issue. In the book, The Effortless Experience, the authors describe how NPS is a key metric looked at in customer service channels. It's difficult to increase NPS when someone calls customer service.
Instead, customer service representatives (CSRs) are charged with trying to limit the decrease in NPS. A key reason for this is that CSRs are scripted to handle issues that come up often. When CSRs are scripted, it can be difficult to empathize with customers. CSRs should be empowered to help customers not only achieve their goals, but also to do it in a way that's empathy-driven.
Companies such as Cogito, help empower CSRs to be knowledgeable and empathize with their customers. Cogito is a call center software company that uses AI to empower employees to create empathy-driven connections with humans. The software will listen in on the calls CSRs are having with customers, and in real time, give feedback to the CSR.
What this means for multichannel retailers
When looking at the top third of companies that were scored on the EXi, the average performance on the key drivers of empathy was five percentage points higher than the bottom two-thirds of brands. However, there is a lot of room for improvement. When looking at performance, ideal scores fall in the mid to high eighties or low nineties on these drivers. The average performance score on these drivers for the top third of brands is only 61% while the average score for the bottom two-thirds is 56%. Here's what this means for multichannel retailers who are ready to make empathy a key driver in their CX strategies.
Building loyalty will be an uphill battle
Not only are multichannel retailers competing with their industry and the ecommerce industry, but they're also competing with the exceptional experiences customers are receiving from other industries. This means that loyalty is going to be more difficult to earn and keep moving forward. To give retailers the best chance of winning and keeping customers, they must show empathy across all channels and touchpoints. Organizational silos need to be broken down, and every employee should understand how they impact the customer journey.
Emotional empathy is the most important pillar of empathy
When customers, prospects, and employees interact with a company, it is important to make them have positive emotional experiences. Making customers feel trust and joy elicits the highest empathy scores while customers who feel anger, disgust, and confusion have the biggest negative impact on empathy. Map out the journey customers take when interacting with your business to determine which emotional states occur at each touchpoint. From here, service-level blueprinting (mapping the internal people and processes aligned with each touchpoint) can occur to determine which internal, backstage initiatives need to be worked on moving forward.
Creating human-to-human connections requires personalization
Creating a human-to-human connection needs personalization, but take care. When brands use personalized content, either digital or non-digital, it makes customers feel like they’re an individual—the brand is taking the time to look at them as a real person. Use prior buying behavior to help with this personalization, but take care not to be so personal it’s intrusive. Speak with your customers to determine the amount of personalization they expect and how you can deliver on those expectations.
Determine what's working well in your non-digital channels and bring it into your digital channels
Empathy is a lot easier to elicit in non-digital channels because you can more naturally create that human-to-human connection. Now that more business is being done in digital channels, customers still want brands to empathize with them. Speak to your customers about what they expect from you in the digital channels they interact with. Determine what they love and what they hate. Use this to segment your customers and build empathy-driven experiences that exceed their expectations.
Build loyalty programs that center around retention
The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is only 5-20%. Determine how you can empathize with customers across all touchpoints, and build loyalty programs that encompass that empathy. Focus on retention of customers and creating fans of the brand rather than trying to focus on advocacy. Coming out of the pandemic, brands are in a difficult but unique situation. Brands need to work harder to rebuild loyalty with their current customers, but brands also have the opportunity to create more loyal customers who are in search of those exceptional experiences.
Brands are competing with customers’ last exceptional experience—be that brand
Look outside of your industry to determine what those best-in-class experiences are that your customers are experiencing, and bring them into your business. Ensure that these experiences are being co-created with these customers and align with your brand promise. Don't be afraid to potentially lose money in a specific channel because you're empathizing with customers. If you empathize with customers and create exceptional experiences, you'll gain higher loyalty, customer lifetime value, and share of wallet. Think of your empathy-driven experience holistically, and determine how each channel and touchpoint works together to drive empathy with your customers.
The UserTesting Empathy Experience Index (EXi), a proprietary methodology, launched a multichannel retail EXi survey to 4,500 individuals across 15 multichannel retail brands. Each brand had a sample size of N=300. The survey was conducted between March 10th and 19th, 2021. The data was balanced to represent the United States General Population based on age and gender.
The brands captured in this study include Nordstrom, Kohls, Home Depot, Lowes, Sam’s Club, Kroger, Costco, Walmart, Target, CVS, Walgreens, Macy's, Bed Bath and Beyond, IKEA, and Best Buy.
The EXi scores range from 0-100. These scores are grouped into five different categories:
- Very poor (less than 25)
- Poor (25-44)
- Ok (45-64)
- Good (65-84)
- Excellent (85-100)
Six brands scored in the "Good" category with the remaining nine brands scoring in the "Okay" category.
Empathy is based on three pillars: emotion, cognition, and compassion. If brands can make the interactions individuals have with them positive (emotion), if they actually can understand the needs of these individuals (cognition), and build experiences that work well for them (compassion), they would be able to deliver empathy. If brands are able to deliver empathy-driven experiences, they would also be able to gain loyalty.
Loyalty was based on three dimensions: the ability for brands to retain customers, make them spend more, and have them recommend others. The methodology looks at how empathy strengthens loyalty.