Return on Experience, the New Metric

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ROI, or return on investment, has been the standard gauge for retailers attempting to quantify how expenditures lead to sales outcomes. Now in an era where customer experience has become the gold standard for building loyalty and lifetime customer value, the term return on experience (ROI or ROX) has entered the lexicon.

Indeed, if retailers and brands have learned anything from the pandemic, it’s that brand loyalty has taken a hit, since consumers have become more demanding and less in love with their once favorite brands. So how can retailers and brands rekindle that lovin’ feeling?

Pearls of Wisdom

To quote Oracle: “Customer experience (CX) refers to how a business engages with its customers at every point of their buying journey. In large part, it’s the sum of all interactions a customer has with your brand.” In retailing, metrics matter and they are key to understanding what works and what doesn’t.

Customer experience is about creating a journey of memorable moments. There are three participants in that journey, the customer, the employees, and the company leadership

In an era of unified commerce, customer behavior is totally dynamic and ever changing. Whether the customer is online, in store, or in a myriad of other touch points of brand engagement, the experience must be exceptional and cohesive.

Veteran change agents and authors Joe Pine and James Gilmore wrote the groundbreaking The Experience Economy in 1999 and identified four realms of experience: Educational, Esthetic, Escapist and Entertainment. When they are integrated properly, they move a customer from passive observer to complete brand immersion advocate.

People who may know little or nothing about architecture often freely quote Mies van der Rohe’s well-known “God is in the details” mantra. I’ve witnessed that attention to detail among successful retail brand builders succeeds only when it is deeply intermeshed into the culture of a company.

Managing the Customer Experience

God is in the details has been self-evident throughout Costco’s history. To quote Costco’s founder and former CEO Jim Sinegal, “Culture is not the most important thing, it’s the only thing.” Costco has become a counterintuitive phenomenon in the world of retailing. It has broken many rules and established new norms on the way to becoming the most successful retail membership club, and one of the most successful big-box retailers … period.

Sinegal referred to the Costco experience as “wonder and stumble” with a feeling of random discovery not unlike a garage sale. But in strong contrast to a garage sale, nothing about the customer experience at Costco is remotely arbitrary or accidental.

Customer experience is about creating a journey of memorable moments. There are three participants in that journey, the customer, the employees, and the company leadership. In the case of Costco, the top-down culture of excellence continues to rule the day, driving spectacular growth and a lotta love from their over 115 million Costco members world-wide.

That loyalty drove net sales of about $192 billion in 2021, across their 830 stores. Their much-loved Kirkland brand alone brought in $58 billion in their latest fiscal year. That’s nearly 25 percent more than the entire revenue of the Nike brand, based on Forbes 2022 Global 2000 calculations.

It’s all working at Costco. The American Consumer Satisfaction Index (ACSI) measures General Merchandise Retailers, and for both 2020 and 2021, Costco was the leader with a score of 81.

Designing Exceptional Experiences

Long before Costco objectified the seemingly subjective customer experience thing, Disney pioneered the art and science of “experiential sequence.” They did this through a carefully engineered multisensory planning process. That type of transformative thinking has become the basis of much of the subliminal messaging and guided discovery built into the most successful retail venues.

My Forbes.com colleague Nicole Martin wrote, “Return on Experience means having the right customer experience management strategy, it’s possible for companies to not only orchestrate and personalize the entire end-to-end customer experience, but to do it moment to moment, at scale, on any channel, and in real-time.”

Sound complicated? Well, it is. It’s very much like choreographing a great dance, orchestral performance, or a memorable dining experience. With the latter, the restaurant’s design and ambiance, the quality and freshness of the ingredients, the chef’s talents, the serving staff attitudes, and even the comfort of the chairs all must play in harmony to yield a culinary experience that will leave you raving about it and coming back for more. If any one of the factors is missing, or out of sync, it can influence the entire experience, and not positively.

Journey of Memorable Moments

The essence of customer experience design has been evident through much of Nike’s store development, beginning with its first NikeTown store in Portland, OR, in 1990 and continuing with New York’s Nike House of Innovation flagship, now three decades later. Nike and the other breakthrough concepts have introduced a host of new interactive, digital tools and apps to take the in-store experience to a new level of unified commerce.

According to The American Customer Satisfaction Index, among specialty retailers Nike scored a respective 80 and 81 points in years 2020 and 2021. This put them ahead of a pack of 36 retailers.

Nike knows how to keep its own house in order, but the same can’t be said for many of its wholesale venders who’ve succumbed to a race to the bottom, driven by price at the expense of a great customer experience. Nike’s pursuit of experiential excellence in recent years led them to cutting ties with many once valued wholesale customers, including many department stores and specialty retailers. A year ago, they announced they were ending relationships with DSW, Urban Outfitters, Shoe Show, Dunham’s Sports, Olympia Sports and Big Five. This was after ending its relationship with nine other accounts a year prior.

Nike knew their brand was suffering from undifferentiated wholesale accounts where their products were becoming commoditized within a sea of other brands. This brand-to-bland depreciation has been emblematic of problems across the retail spectrum, and certainly among many of the department stores.

The move to ratcheting up Nike’s direct-to-consumer (DTC) sales came with the introduction of new, localized selling venues, including the Nike Live format store used as a social media beacon, complemented by their digital app. Additionally, Nike Rise curates a 1-to-1, personalized shopping journey that connects consumers to sport, their communities and one another.

Meaningful, Authentic and Valuable Experience

Experiential retail is about passion and long-term customer value. It’s about getting deeper into the customer’s psyche, to understand their values and needs, and provide them with both the education, goods, and services necessary to meet their short- and long-range expectations around their passions. The very best retailers understand this, and Dick’s House of Sport is an experiential palace.

House of Sport is an authentic event and activity driven venue and as described by Dick’s, “immerses the public in a one-of-a-kind experience where sports meet fashion, community and love for the game.” For example, if baseball is your thing, grab a bat and swing away in the HitTrax batter’s cage, after you select your favorite National League field to do it in. If your sport requires cleats, get the true fit and feel on built-in turf, in the House of Cleats. Want to take that a step further? Take it outside, onto an actual field with both real turf and an Olympic quality track (coming this fall). “The Field” is a year-round outdoor track where you can test products, practice team drills, even participate in youth sports camps or run laps on the track; for real! Solution-based retail is about focusing on lifestyle and dynamic product usage over static product. The visual merchandising teams have created over 600 mannequins in motion displaying product like none other in merchandising “strike points” that are, well, striking.

The design team has also managed to elevate every brand in both a cohesive, and unified manner that gives each of them a stunning presentation without multi-brand overwhelm. And from the viewpoint of a veteran store designer, this is a high wire act that few multi-brand merchants ever achieve. This edifice to sport and brand immersion is the high watermark for customer experience and will yield the appropriate return on experience (ROX), mark my word.

This concept takes the customer experience from passive purchasing to active participation and brand immersion. It builds passion around the Dick’s brand and builds lifetime customer value. It’s a store customers will truly fall in love with.

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