Marketing leaders say they’re ramping up investments in overall customer experience to distinguish their brands from the competition, according to new data from The CMO Survey released February 26.
The twice-yearly poll of marketing executives at U.S. for-profit companies shows spending on customer experience has increased 71% over the past three years.
Customer experience now comprises more than 15% of marketing budgets compared to about 9% in 2017, according to the poll of 265 top marketers sponsored by the American Marketing Association (AMA), Deloitte and Duke University’s Fuqua School of Business.
“Companies are realizing customer experience is where they can stand out relative to their competitors,” said Christine Moorman, a Fuqua marketing professor and director of The CMO Survey. “It’s not just about the product or service, but the entire customer journey from beginning to end, and it’s something companies should be explicitly managing.”
Firms face challenges when building customer experience
Focusing on customer experience requires more than just hiring a customer experience officer, Moorman said.
“A lot of companies aren’t getting what they could out of it,” said Moorman, who outlined challenges in managing customer experience in a recent AMA article. “They haven’t really thought about building their capabilities throughout the customer journey. They also often forget the importance of a customer-focused culture as an essential ingredient in getting the entire company to focus on creating and delivering an outstanding customer experience.”
Companies expect to increase spending on customer experience by a third over the next three years, bringing it to about one-fifth of their overall marketing budgets. The stakes will be higher for companies that provide services to other businesses, which expect customer experience to make up one-fourth of their total marketing budgets over the next three years.
Data show confidence in consumers
Marketing chiefs also said they expect customers to place a stronger emphasis on building trusting relationships with their brands this year rather than prioritizing low prices, which historically has been a top consumer concern.
“Marketers think consumers are doing well, so they’re not going to be as focused on price,” Moorman said, “and beyond that, they expect they’ll even be able to acquire new customers.”
Marketers using metrics that miss the big picture
The survey also revealed surprising insights into how companies are measuring performance, Moorman said. Most often, marketers report that their companies look at traditional accounting metrics, such as sales or profits. The survey found they’re placing less emphasis on forward-looking indicators such as how much money a customer will spend with the company over the course of the relationship (also known as customer lifetime value), the survey found.
“The very best metrics to use in marketing are the forward-looking ones,” Moorman said. “Profits and sales growth tell you about what a customer is worth today, but what really matters is a customer’s value to your future growth. These forward-looking metrics tell the company something much more valuable about its effectiveness over time, so it was surprising to see the stronger focus on sales or profits.”
Additional insights:
Marketer optimism measured at 62.7 points out of 100, up from 57 points, which was the lowest point of the survey’s past eight years. Companies with annual revenues under $25 million showed the most optimism, measuring 65.7 points.
Over the past year, planned hiring in marketing has dropped to about 6%, hovering near the long-term historical average for the past decade of The CMO Survey. Still, managers expect almost double the hiring in four industries: health care, technology, communications and retail. Companies with sales revenues between $26 million and $99 million are forecasting the most growth in hiring, the data showed.
Marketers currently spend about 2.1% of their budgets targeting buyers in China -- up from 1.7% three years ago. Although the percentage seems small, increased international sales would boost exports and benefit the U.S. economy, Moorman said. Marketers expect these budgets to double to 4.2% in the next three years, with the biggest expenditures in the mining and tech sectors. (Editor’s note: the survey was conducted from January 7-28, 2020, prior to the widespread outbreak of coronavirus in China.)
For more in-depth analysis of the results, including how trends break down across business-to-business and business-to-consumer firms, visit cmosurvey.org