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The customer (experience) is not always right

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Jan 31, 2023
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Illustration: Aïda Amer/Axios

Retailers' focus on investing in digital customer experience solutions to bolster sales has caught Zendesk's attention, CTO Adrian McDermott tells Axios.

Why it matters: With its private equity backing, Zendesk will opportunistically scan the market for R&D and intellectual property in the customer experience (CX) space.

State of play: Customer satisfaction has sharply declined since 2018, according to the American Customer Satisfaction Index.

  • As of the third quarter of 2022, the index fell to 73.2, down from 77 in the third quarter of 2018.
  • In the wake of the COVID pandemic, retailers are increasingly focusing on how to integrate their physical and digital storefronts.
  • "This idea of brick-and-mortar and digital, and the idea of being more consistent and immersive for the customer, is driving a lot of interest and investment" for retailers, McDermott told Axios on the side of NRF Retail’s Big Show this month.
  • San Francisco-based Zendesk is a software-as-a-service provider of customer support, sales and customer communications functions.

Zoom in: A major theme at NRF was investment in the frontline workforce.

  • Retailers are investing in tools to empower in-store personnel who can share their expertise and fix issues or help with orders online and off, McDermott says.
  • "We've seen a lot of people trying to leverage their CX interactions and turn them into these moments of actual brand-loyalty building," he says.

The intrigue: Investment in CX technologies — like conversational commerce and automation — helps personalize the shopper's experience.

  • Retailers are able to bring up their average order value because they're having their people have conversations with customers, McDermott says.
  • They’re better able to understand the customers' needs, provide them with a better product, and get them to buy more because they're building that trust, he says.
  • Zendesk itself is already investing heavily in conversational commerce and the AI that feeds into automation, he adds.

Context: Zendesk was taken private last year by buyout firms Hellman & Friedman and Permira in a $10.2 billion deal.

  • As part of the deal, the company received a $3.75 billion senior secured term loan facility and a $350 million revolving credit facility.
  • "We love to build, but buying’s awesome too," he says.

By the numbers: One in five customer experience programs are projected to "disappear" this year, according to a report by Forrester Research.

  • While many companies will have to prove the value out of their CX efforts, "the 20% of companies that embrace great CX as part of their brand identity will reward CX teams that can show positive ROI," the report finds.
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