How to overcome the CX Paradox
Customer Experience (CX) has emerged as a cornerstone of modern business strategy, driven by its potential to enhance customer satisfaction, loyalty, and advocacy (Lemon & Verhoef, 2016; Homburg et al., 2017). And most of the organizations invest heavily in designing seamless and memorable experiences to differentiate themselves in competitive markets.
However, the pursuit of superior CX is not without its challenges. In striving to create ever-better experiences, organizations often encounter unintended and unexpected consequences, a phenomenon increasingly referred to as the Paradox of CX (Zha et al., 2023; EY, 2024). This paradox highlights the complex interplay between customer expectations, perceived value, and the financial outcomes of CX investments. While firms aim to delight customers and foster loyalty, their efforts may inadvertently result in dissatisfaction, inefficiency, or even alienation (Smith & Lewis, 2011).
The concept of CX is deeply rooted in service and marketing literature. Early work by Pine and Gilmore (1998) emphasized the transition from a goods-dominant logic to an experience economy, where organizations compete by staging memorable customer interactions. This shift signaled a growing emphasis on emotional engagement and personal relevance in shaping customer perceptions. However, as expectations rise in tandem with investments, the gap between customer desires and actual experiences may widen, creating what Zeithaml et al. (1990) describe as a quality gap. This gap underscores a critical dimension of the CX paradox: the difficulty of meeting—or exceeding—escalating expectations without overextending resources and costs.
One notable challenge within the paradox is managing the trade-off between cost and value. For those who have read my articles before, I am intrigued by this trade-off and tension. Behavioral Economics research, such as the work of Kahneman and Tversky (1979), highlights the diminishing marginal utility of incremental CX improvements. Diminishing marginal utility refers to the phenomenon that each additional unit of gain leads to an ever-smaller increase in subjective value. For example, three bites of candy are better than two bites, but the twentieth bite does not add much to the experience beyond the nineteenth (and could even make it worse). To put it different, beyond a certain point, additional investments yield minimal gains in customer satisfaction, complicating the task of designing cost-effective experiences
Cost and Value
The Cost vs. Value aspect of the CX paradox arises when organizations pour resources into improving customer experiences, but the customers either fail to notice these efforts or do not value them as highly as the company anticipated. This can lead to diminishing returns, wasted resources, and even customer frustration if they perceive these investments as unnecessary or irrelevant.
Zeithaml (1988) defines perceived value as the customer’s overall assessment of the utility of a product or service based on what is received (benefits) and what is given (costs). In CX, this translates to customers weighing the experiential benefits (e.g., convenience, personalization, delight) against the effort, time, or monetary cost to access them. I recently wrote an article about this relationship which you find here
If the “value-added” investments are not aligned with customer priorities, they may feel the enhancements are not worth the price or effort.
One of the key pillars of IKEA’s approach is its self-service model. By requiring customers to collect flat-pack furniture from warehouse sections and assemble it themselves, IKEA significantly reduces labor and logistics costs. This operational efficiency allows the company to maintain competitive pricing without compromising on quality. For customers, the process offers an added sense of ownership and satisfaction, a phenomenon described in behavioral economics as the “IKEA Effect,” where individuals value products more when they contribute to their creation (Norton, Mochon, & Ariely, 2012).
In its physical stores, IKEA enhances the customer experience by turning shopping into an enjoyable event. Features like fully furnished room displays provide inspiration, while family-friendly services such as children’s play areas and affordable cafeterias create a welcoming atmosphere. These elements not only meet practical needs but also foster emotional engagement, transforming a mundane shopping trip into an experience. Simultaneously, the store’s maze-like layout exposes customers to a broader range of products, subtly encouraging additional purchases while keeping staffing needs minimal.
Innovation also plays a crucial role in IKEA’s strategy. The introduction of the augmented reality (AR) app IKEA Place exemplifies how the company carefully integrates technology into its offerings. This app allows customers to visualize furniture in their homes before making a purchase, reducing the risk of dissatisfaction. While technologically advanced, the app is straightforward and serves a clear customer need, demonstrating IKEA’s balance between innovation and usability. Moreover, by reducing the rate of returns, this technological solution also contributes to cost efficiency.
Additionally, IKEA has made significant strides in integrating its online and offline experiences. With options like click-and-collect services, IKEA accommodates diverse customer preferences, blending the convenience of digital shopping with the tactile experience of its stores. This approach ensures that investments in both physical and digital infrastructure are optimized rather than excessive.
The success of IKEA’s strategy is evident in its financial and reputational performance. Despite economic uncertainties, the company reported very solid revenues, showcasing its resilience and customer appeal. Furthermore, IKEA consistently ranks high in global customer satisfaction surveys, reflecting its ability to deliver meaningful value without overextending resources (Statista, 2023).
IKEA’s example demonstrates that aligning cost and value in CX is not merely about cutting expenses or maximizing profits. It is about creating a thoughtful, customer-centric approach that enhances satisfaction while ensuring long-term sustainability. This balance allows IKEA to remain a leader in a highly competitive retail landscape.
Practical take aways
1. Invest in Understanding Customer Priorities
2. Optimize CX with Data-Driven Decisions
3. Simplify Processes to Reduce Complexity
4. Test Innovations Before Scaling
5. Focus on Consistency Over “Delight”
6. Build Cross-Functional Collaboration
7. Adopt a Continuous Improvement Mindset
Wrapping up
Profitability is deeply intertwined with the CX paradox because the resources allocated to improving CX must yield measurable returns. For organizations, this balance translates into designing experiences that justify their costs while delivering tangible benefits. Over-investment in features that do not resonate with customers leads to diminishing returns, as seen in cases of technological overreach or overly ambitious personalization strategies (fig 1.).
From a strategic standpoint, profitability in CX stems from a holistic approach. Organizations must focus on simplifying processes, prioritizing consistent delivery, and leveraging technologies that enhance efficiency without increasing complexity. Practical strategies, like reducing customer effort (Dixon, Freeman, & Toman, 2010) or adopting hybrid online-offline models (IKEA), demonstrate how aligning cost and value can lead to sustainable advantages.
In summary, the CX paradox is not an insurmountable challenge but a framework for thoughtful decision-making. By balancing investments with value creation and continuously monitoring profitability metrics, organizations can navigate this paradox effectively, turning it into an opportunity for innovation and sustainable growth. This approach ensures that CX strategies not only delight customers but also drive financial resilience in competitive markets.
IKEA serves as an exceptional example of a company that has successfully aligned cost and value in its approach to Customer Experience (CX). Its strategies reflect a deep understanding of customer needs while maintaining a strong focus on operational efficiency, ensuring both affordability and satisfaction.
Reducing the tension between cost and value in the Customer Experience (CX) paradox requires a strategic approach that combines customer insights, operational efficiency, and iterative improvement. Here are practical takeaways organizations can use to address this challenge:
Organizations should focus on identifying what customers truly value. Conducting qualitative and quantitative research (e.g., surveys, focus groups, customer journey mapping) helps distinguish features that drive satisfaction from those that add unnecessary complexity. One way is to use the Kano Model to classify features into “must-have,” “performance,” and “delighters,” and prioritize investments in those that align with customer priorities (Kano, Seraku, et al., 1984).
Leverage data analytics and AI to track customer behavior and identify patterns of unmet needs or inefficiencies. This ensures resources are directed toward initiatives with high ROI. Retailers like Amazon use predictive analytics to optimize inventory, suggest relevant products, and streamline the shopping experience, balancing cost with personalized value.
Streamline processes to minimize friction. A simpler experience often translates into both higher customer satisfaction and lower costs. Conduct a “complexity audit” of customer journeys to identify touchpoints that can be simplified without sacrificing quality. Southwest Airlines’ no-frills model removes unnecessary features like seat assignments, focusing instead on delivering consistent service and competitive pricing.
Innovative technologies should be piloted in limited markets or customer segments to assess their effectiveness and customer acceptance before full-scale deployment. Use agile methodologies to iterate on CX innovations, incorporating customer feedback early in the development cycle (EY, 2024). A good example is Starbucks who initially tested its mobile ordering app in select locations, ensuring the technology complemented rather than complicated the customer experience.
Meeting expectations consistently can drive satisfaction more effectively than sporadic “wow” moments, which may have diminishing returns. Research by Dixon, Freeman, and Toman (2010) found that reducing customer effort, such as by solving issues quickly, fosters loyalty better than exceeding expectations.
Aligning cost and value requires breaking silos within the organization. Cross-functional teams from marketing, operations, IT, and finance should collaborate to design CX solutions that balance creativity with feasibility. What could work is holding regular “CX alignment” workshops to bring different departments together and evaluate initiatives from multiple perspectives.
Finally, CX design should be treated as an ongoing process rather than a one-time investment. Regular monitoring and iterative improvements ensure that cost-value alignment evolves alongside customer expectations. Establish CX Key Performance Indicators (KPIs), such as Net Promoter Score (NPS), Customer Retention Rate, and operational costs, to track progress and adjust strategies accordingly.
Balancing cost and value is at the heart of addressing the Customer Experience (CX) paradox, as it underscores the delicate relationship between enhancing customer satisfaction and maintaining profitability. While investing in CX is often seen as a pathway to higher loyalty, advocacy, and long-term revenue, the paradox reveals how misaligned or excessive investments can erode margins and alienate customers. This tension highlights that CX is not merely about maximizing delight; it is about creating sustainable experiences that align with customer needs and organizational capabilities.