Of Customer Experience Elasticity

There is a concept in economics called elasticity. Can elasticity be applied to Customer Experience (CX)? To what degree does friction in the customer journey impact sales?

Before the ‘Virus’, when times were good, it was easier for companies to get away with being okay. Good was enough. After all, excellence is expensive and losing a customer here or there wouldn’t really matter in the scheme of things. Customers were willing to, or didn’t have a choice but to, put up with friction in the customer experience – but that’s changed.

How much friction will your customers endure before they switch?

Price elasticity is a measure of the degree to which demand or supply reacts to price. Sales of an elastic product fall sharply when there is a small increase in price. Demand for an inelastic product might not be effected if there is a large price change.

But elasticity can also be applied to Customer Experience (CX). Demand for an experience elastic service would fall if there were small amounts of friction added to the journey. An experience inelastic product would see small changes in sales even if barriers were added or removed.

Elasticity is linked to another economics concept – switching costs. There is a trade-off, between the amount of effort a customer has to expend versus the switching cost of completing their customer journey elsewhere.

Different companies have different attitudes towards switching costs. In a world where decisions are made in the interests of the company rather than the customer, switching costs may be engineered into products and services to create barriers to entry and exit. For example:

• Company A : Our product is so simple to use, and satisfies all of our customers’ needs. They wouldn’t want to switch.
• Company B : Now that you have started using our product, even though it’s not perfect, you have to keep using it, because if you move to another one it would be an enormous inconvenience. Oh, and you also have to buy other things from us too, because our product is not compatible with others.

These differing approaches are philosophical. Some very successful brands use the ‘Company B’ strategy – Apple! Sony! It could be argued that Amazon is an example of a ‘Company A’.

Customer Effort Score (CES) scaled up.

User Experience (UX) designers use a measure called Customer Effort Score (CES) to identify friction at specific parts of the (online) customer journey. You may have seen pop-up surveys that ask ‘How easy was it to complete what you came here to do?’

There is a provable relationship between friction in an online journey and conversion rates on ecommere stores, but maybe this concept needs to be applied across the whole experience. Not just the website or app. And I am not talking about smiley or sad face buttons.

A Holistic Approach to CX

Are you a Company A, building products and services that your customers could switch away from, but don’t. Or are you Company B – creating barriers to exit and making decisions to increase profit at the customers’ expense? Is NPS more important than Share Price? Should every employee have a CX related KPI?

Our CX Typology Framework allows you to measure your people, teams, business units, boards and customer perceptions and map the results to a framework that can be used for benchmarking around the world.