Can customer experiences threaten profitability?

29 January 2019 09:55

Can customer experiences threaten profitability?

Leaders assume that customer experience and profitability have a strong and positive relationship, but the evidence tells a different story. This was the topic for a recent seminar with CSI researchers and several partners.

Over the last years, there have been an increased focus on customer orientation and customer-centric business development in the Norwegian business community.

Service design and Design thinking have become part of the business language, and many companies invest heavily to improve the experiences of their customers.

Professor Tim Keiningham from St. Johns University is  an expert on the subject of customer satisfaction and profitability.
Professor Tim Keiningham. Photo: CSI

In other words, leaders assume that customer experience and profitability have a strong and positive relationship. However, empirical evidence shows that this relationship does not necessarily exist, and, if it does, it can even be negative.

Thus, the question is what companies aiming for increased profitability should focus on instead of blindly following the quest for the absolute customer satisfaction.

At the Center for Service Innovation (CSI), we have been long studying various issues related to new business model innovation, innovation leadership, service design, and customer experience.

As a part of our dissemination activities, we invited Professor and world-renowned loyalty expert Tim Keiningham from St. Johns University to Norway to discuss the link between customer experiences and firm profitability.

Tim is one of the authors behind the New York Times bestseller The Wallet Allocation Rule and is also affiliated with the CSI. The Wallet Allocation Rule contains groundbreaking thinking and practical advice for executives on the subject of customer satisfaction and profitability.

Professor Tim Keiningham speaks at the round table at Bekk.
Professor Tim Keiningham speaks at the round table at Bekk.

During this visit, Tim - who is also a CSI Advisory Board member -  and several CSI partners from Evry, NFR, NHH, Posten, and Telenor participated in an informal round table discussion that CSI and Bekk organized on 16 January. The discussion started with presentations by Stian Daazenko from Bekk and Professor Keiningham.

During the open CSI seminar "Can customer experiences threaten customer profitability" that Bekk hosted on 17 January, we challenged the common myth that improved customer experience is always good for business. We also explored alternative approaches to attracting more profitable customers.

Professor Tor Wallin Andreassen speaks at the open CSI seminar 17 January.
Professor Tor Wallin Andreassen speaks at the open CSI seminar 17 January.

Speakers were Tor W. Andreassen (Professor and Managing Director, CSI/NHH), Tim Keiningham (Professor, St. Johns University); Stian Daazenko (Principal and Research Director, Bekk/CSI); Seidali Kurtmollaiev (Postdoctor, CSI/NHH); Arne Tjora (Discipline Lead Intelligent Analysis, Bekk), Jonas Nouri (Discipline Lead Data Science Intro, Bekk), and Elisabeth Barrie (Head of product development, Vipps).

The event was facilitated by Harald Krogh (Managing Director, Bekk).

The topic has proven to be timely and relevant: more than 80 participants attended the seminar, participated in vivid discussions, and shared their knowledge. We are looking forward to developing this research area further.

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