CEOs Need a Customer Experience Revolution—Not an Evolution
A new CX paradigm for driving business value could be the biggest growth opportunity to come along in decades.
Omnichannel, omnichannel, omnichannel. That’s been the mantra for most companies over the past decade, and for good reason. But while companies have created useful bridges between some channels, such as “buy online, pick up in store” and “research online, purchase offline,” most customer journeys have remained standardized, linear, and tied to a specific channel. That’s about to change.
Instead of go-to-market constructs centered around distribution, the new era of customer engagement will center on touchpoints—the chatbots, kiosks, robo-advisors, and other physical-digital-and-virtual interactions that customers have with companies as they navigate their purchasing journeys.
Today, a customer can scan a QR code and pull up basic product or pricing information while shopping in a store. Soon, however, that same QR code could allow customers to connect with a sales agent, purchase a good, and join a community of users—all from a single interaction.
The shift is a result of maturing technologies that give touchpoints greater functionality and connected networks that feed them continually refreshed insights. Rather than acting as a node on a predefined distribution path, touchpoints are becoming full-blown portals.
These advances will reset the rules of engagement, allowing leaders to attain true omni capabilities. Getting there, however, will require orchestrating even more data and analytics and managing the massive leap in complexity that will result.
Purchasing journeys contain exponentially more touchpoints than they did just a few years ago. In 2014, for example, Google research found that the average journey had nine customer-company interactions. Now companies provide anywhere from 20 to 500, depending on the offering.
One reason for the leap in touchpoint-centered engagement is declining costs. Just a few years ago, the tools for next-generation interactions were either not commercially viable or too expensive for companies to deploy at scale. But capabilities and price points have both improved markedly. It now costs about 33% less to create an artificial-intelligence-based image-classification system than it did four years ago, and training times have improved by 94%. Likewise, the median price of robotic arms today is 46% lower than it was five years ago.
Another reason is that critical capabilities are easier to access. Use of the cloud has grown dramatically. So, too, has a burgeoning array of services to make use of cloud-based data. That combination has allowed companies to engage with customers in increasingly sophisticated ways.
Third, investment in next-generation engagement has continued to soar. Funding of in-store tech has more than quadrupled since 2017, surging from $2.4 billion to $10.7 billion, and AI initiatives attracted $93 billion in 2021, up from $40 billion in 2019.
These forces are making touchpoints not only more numerous but also more powerful. And we’re still only at the cusp.
Over the next few years, we expect to see touchpoints play an increasingly central role in customer journeys. Rather than serving as a waystation along a linear, channel-specific path, touchpoints are becoming an omni gateway. (See Exhibit 1.)
This evolution is being fueled by three powerful enablers:
Together, these advances will allow customers to take the reins of their purchasing experiences fully in their own hands. Through a turbocharged touchpoint, customers can access whatever buying stage they like over whatever medium and channel they wish in whatever order they prefer—creating the potential for true omni engagement.
Leading companies are already beginning to pounce on the opportunities enabled by these advances. L'Oréal, for instance, has created a connected device that allows users to print custom lipstick, incorporating shades from the company’s Yves Saint Laurent line. Customers can take a photo of their outfit, and a YSL app will generate a few lipstick colors to go with it, which customers can try on using augmented reality (AR) filters. Once they find a shade they like, they can hit a button, and the device will print a few drops of the lipstick that the customer can then apply. L'Oréal captures data on all of these interactions and funnels that information to product development, marketing, and other functions, allowing them to see what works and what to refine.
In addition to creating multiple new touchpoints, L'Oréal has packed more functionality into existing ones. The company gave the humble QR code a facelift, for example, expanding the use of these codes to 19 brands and 5,000 products. The goal is to be more transparent with customers about product sourcing and development, providing them with information about ingredients, manufacturing location, and environmental and social performance.
B2B companies are also using connected touchpoints to deliver new offerings that add customer value. John Deere, for instance, has created an ecosystem of smart equipment and data intelligence to help farmers improve yields, profitability, and sustainability. In the field, farmers can use farming equipment, like a sprayer, that is equipped with computer vision and machine learning, to kill weeds with hyper-targeted applications of herbicide instead of spraying the entire field, cutting the use of chemicals by up to two-thirds. The company also created the John Deere Operations Center, a digital farm-management system, allowing farmers to monitor their equipment, share information with partners, and manage infield work to do more with less.
As innovation continues, we expect use cases of touchpoints to fall into three main categories. (See Exhibit 2.)
Frictionless experiences that employ touchpoints to simplify purchasing steps. Amazon Go stores are the apotheosis of this type of experience today, with the store itself serving as a unified, uber-integrated touchpoint that allows customers to complete their entire shopping journey by doing nothing more than striding in, grabbing whatever items they like, and walking out. QR-enabled payments and smart carts that scan items automatically are just some of the many technologies that will enable this type of journey.
Augmented experiences that allow customers to access integrated information in a multisensory way, “seeing” or “feeling” things in one place, which would otherwise be impossible to do. Smart mirrors that allow customers to try on outfits virtually are one example. Today, for instance, H&M is equipping some of its fitting-room mirrors with radio-frequency identification (RFID) technology capable of recognizing the size and color of clothes customers bring in with them, then displaying personalized product and styling information on the mirror. Over the next few years, as AR/virtual-reality tools become more mainstream, we’re likely to see significant innovation in how these capabilities are embedded into the purchasing process.
Intuitive interactions that leverage real-time insights to enable curated content and empathetic engagement. Nike’s flagship stores allow customers to try out gear in activity centers equipped with basketball hoops, treadmills, and other fitness options. Cameras capture a customer’s gait and movement, allowing sales staff in the store to make more specific recommendations. Digital assistants then keep the empathy going—through apps that allow customers to view and share footage of themselves playing basketball, bots that provide tailored communications, and automated push notifications that send individuals special offers designed just for them.
Touchpoint-centric engagement has the potential to unleash massive value for customers and businesses. But that potential comes with a price: an equally massive increase in data and process complexity. Such complexity was already high as companies orchestrated the shift to omnichannel. The increasing use of touchpoints will make that orchestration challenge significantly greater.
With the right roadmap, however, these issues don’t have to overwhelm. The following strategies can help companies begin capturing the true potential of omni.
Enabled by maturing technologies, accelerated by customer demand, and inspired by the pioneering examples of native tech businesses, the future of retail isn’t omnichannel; it’s about everyday interactions with an array of digital, physical, and virtual touchpoints.
ABOUT BOSTON CONSULTING GROUP
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.
© Boston Consulting Group 2023. All rights reserved.
For information or permission to reprint, please contact BCG at email@example.com. To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com. Follow Boston Consulting Group on Facebook and X (formerly Twitter).