Chewy, Peloton, and Monzo have successfully disrupted their industries — pet supplies, fitness, and banking, respectively — by prioritizing customer experience over attacking direct competitors. These companies recognized that the key to their success wasn’t merely offering sophisticated products or clever marketing, but rather addressing customer needs that traditional players had neglected.

For instance, Chewy enhanced the pet shopping experience by dialing in to the deeply emotional connection people have with their pets, while Peloton created a community around its fitness platform, transforming home workouts into engaging, interactive experiences. Monzo challenged the conventional banking model by providing an intuitive app and transparent services that empowered users, appealing to a tech-savvy audience frustrated with traditional banks.

While investing in customer experience is not a novel concept — research shows that over 60% of consumers in the US and UK are willing to pay more for superior experiences — many companies still struggle to do it effectively.

A disconnect exists between executives’ beliefs and customer realities: While 80% of executives think they provide superior experiences, only 8% of customers agree. Additionally, over two-fifths of companies do not regularly assess the impact of customer experience on their performance. This gap suggests that, although leaders recognize the importance of customer experience, they often fail to prioritize it in their strategies and operations.

The pitfalls of prioritizing performance over customer experience

Executives often prioritize features and functionality — referred to as “performance” — over customer experience, falling into two primary traps:

The differentiation trap

Many leaders mistakenly believe that success hinges on offering something unique. This overemphasis on product differentiation can alienate customers, as companies focus on flashy features rather than impactful customer experiences. A common symptom of this trap is benchmarking against competitors, which can be misleading. Companies often assume competition is defined by similar product attributes, ignoring that customers define categories based on their needs and experiences. Ultimately, “difference” matters less than relevance; customers seek solutions that help them resolve problems and achieve their aspirations.

The performance trap

Another issue is the continual improvement of features that may no longer serve customer needs. Organizations often cling to outdated metrics and processes, leading to enhancements that exceed what customers value. Companies that focus excessively on performance metrics like margins and market share often neglect critical insights about customer progress and preferences. This reliance on seller-centric data can hinder a brand’s connection with its audience.

Moreover, many managers find the concept of customer experience abstract and challenging to measure. Although they recognize its importance, 60% of surveyed executives admit they lack sufficient data to make meaningful improvements. This creates a vicious cycle: If experience isn’t measured, it can’t be effectively managed.

To break free from these traps, brands known for exceptional experiences adopt different strategies. They prioritize understanding customer needs, gathering relevant data, and focusing on delivering meaningful experiences that resonate with their audience.

Four core principles to elevate customer experience and drive loyalty

1. Measure customer feelings to understand their choices

The emotional dimensions of customer experiences are central to understanding customer choices. People remember how a product or service made them feel long after they forget the specifics of its functionality. Additionally, social factors, such as how friends, family, and colleagues perceive us, play a crucial role in shaping customer criteria.

Take Peloton as an example. Unlike competitors like SoulCycle and FlyWheel, which focused on physical locations, or Fitbit, which emphasized technology, Peloton identified a social and emotional gap in the fitness market. The founders were frustrated by the challenges of securing spots in popular classes and the need to align their schedules with gym hours. This frustration led to the creation of a brand that has cultivated a loyal customer base by transforming home fitness into a hyper-social, inclusive communal experience where every rider feels celebrated and part of something larger.

2. Adopt a service-oriented mindset for all products

Every product we use serves a purpose, enabling progress in resolving problems, satisfying obligations, or fulfilling desires. When managers view products as services that facilitate this progress, they gain a more accurate understanding of how customers engage with them. For companies already in the service sector, there’s a subtle shift from merely delivering services to focusing on customer progress and fulfillment.

Howard Schultz, the chairman of Starbucks, recognized this in 2007 when he noted that standardized store designs and automated machines had stripped away the brand's essence. He stated that the stores had lost their "soul," and it was essential to return to the core values that made Starbucks special. Upon retaking the helm in 2008, Schultz made a bold decision to close all 7,100 US locations for employee retraining — a $6 million investment aimed at revitalizing "The Starbucks Experience" that ultimately helped the company regain its financial footing and continue its expansion.

3. Configure capabilities to optimize customer experience

Experience champions prioritize customer experience as the core of their value proposition. They align both internal capabilities and external features to create intentional and exceptional experiences. To achieve this, organizations need to assemble resources, processes, and metrics that energize an experience-led strategy rather than just operational efficiency.

Chewy exemplifies this approach by building a customer-first service engine dedicated to pet owners. The customer care team is viewed as a vital part of the organization, not just a cost center. Chewy trains its agents to solve customer challenges autonomously and empathetically, without restrictive scripts or protocols. This commitment to high-touch service is evident in their rapid response times — agents answer calls within six seconds — and their use of comprehensive customer data to enhance interactions.

Chewy also stands out with its "Wow" team, which surprises customers with personalized touches such as handwritten holiday cards or condolence flowers. This focus on empathy over efficiency has allowed Chewy to thrive, generating $9.38 billion in pet supply revenue in 2022, while competitors like Amazon and Walmart focus on speed and cost.

4. Establish the CEO as chief of experience

Every experience champion has a chief executive who actively leads the charge in prioritizing customer experience. These leaders articulate a compelling vision where customer experience becomes a competitive advantage, guiding resource allocation, career advancement, and customer interactions. They prioritize experience metrics in executive meetings and budgeting, ensuring that customer experience improvements take precedence over short-term efficiency gains.

Herb Kelleher, the founder of Southwest Airlines, embodied this principle. He launched the airline during a time when air travel was largely a luxury for the upper class. Kelleher focused on providing accessible fares and exceptional customer service, promoting a culture of warmth and individual pride. He led by example, regularly engaging with both employees and customers to identify opportunities for improvement. This hands-on approach has remained ingrained in Southwest's culture, as evidenced by their innovative use of speech analytics to derive insights from customer interactions.

Embrace key customer experience principles and achieve experience champion status

To achieve experience champion status, leaders must embrace key principles that focus on enhancing customer experiences. A critical aspect of this evolution is identifying where current customers are facing frustrations or obstacles. Rather than merely assessing needs, understanding where customers are actively trying to make changes offers a more reliable pathway to innovation.

Leaders should also investigate the realm of nonconsumption. While measuring consumption through transactions is straightforward, identifying potential customers who are not engaging with a product or service is more complex yet crucial. Companies like Venmo, Starbucks, and Airbnb found success by tapping into unmet needs and nonconsumption within their respective markets.

As competition in various categories intensifies, leaders must be aware of shrinking margins as well. When businesses converge around similar features and marketing strategies, the door opens for innovative customer experiences. For example, Amazon Web Services revolutionized computing by offering it as a service, while Spotify enhanced the music distribution experience through curation and data utilization.

Ultimately, individuals seek progress and a connection to something greater. Experience leaders harness these fundamental human drives in both ordinary and extraordinary moments. In times of slow growth or increased competition, the instinct may be to cut costs or pursue incremental improvements. However, a more effective strategy is to pause and reflect on the experiences of frustrated customers who may be switching brands. By centering customer experience in strategic initiatives, organizations can uncover significant opportunities for growth and profit that may be overlooked.

A version of this article was originally published on Lippincott.