In the evolving landscape of business strategy, experience management has emerged as a critical differentiator. As organizations navigate the complexities of the Experience Economy, first conceptualized by Pine and Gilmore (1998), the need for robust governance frameworks has become increasingly apparent. This article introduces Experience Level Agreements (XLAs) as a pivotal tool for governing experience management at scale, addressing the challenges of measuring and maintaining quality experiences across diverse touchpoints and geographies.
The Evolution of Experience Management
The journey from product-centric to experience-centric business models has been marked by significant milestones. From Disney’s pioneering efforts in holistic experience design to the widespread adoption of Net Promoter Score (NPS) developed by Reichheld (2003), organizations have sought ways to quantify and enhance customer experiences. However, as the field has expanded to encompass customer, employee, supplier, student and even patient experiences, the limitations of existing metrics have become evident.
The critique of NPS as “a process without an outcome” (Reichheld & Markey, 2011) has been extensively researched by and found to be an unreliable predictor of experience of business outcomes. (Morgan and Lopo, 2006.)
This underscores the need for more comprehensive frameworks that link experience design to tangible business outcomes. This gap between measurement and meaningful action has led to the development of XLAs as a governance tool for experience management.
XLAs: Defining the Framework
Experience Level Agreements (XLAs) represent a commitment to delivering defined experiences based on measurable indicators. Unlike traditional Service Level Agreements (SLAs) that focus primarily on operational metrics, XLAs incorporate a broader spectrum of data points to capture the nuanced reality of user experiences.
XLAs are built upon four key components of Experience Anticipation:
- Brand Expectations
- Promises of the Defined Experience
- Individual Expectations
- Memories of Past Experiences
This multifaceted approach to understanding user expectations aligns with contemporary theories of consumer behavior and psychology (Lemon & Verhoef, 2016).
The XLA Stack: Integrating Multiple Data Sources
At the heart of an XLA lies the XLA stack, a visual representation of the experience ambition and integrated, various types of indicators:
- Experience Indicators (e.g., surveys, social media feedback)
- Operational Indicators (e.g., wait times, order accuracy)
- Technical Indicators (e.g., system uptime, app performance)
This comprehensive data integration allows organizations to move beyond siloed metrics and gain a holistic view of the experience landscape. The XLA stack applies algorithms to ensure the highest likelihood of achieving the defined experience ambition and business outcomes, aligning with the principles of data-driven decision-making in experience management (Homburg et al., 2017).
Governance Through XLAs: A Potential Application at Starbucks
To illustrate the practical application of XLAs, consider the case of Starbucks. The company’s ambition to “become the top-of-mind place for groups of friends to come together, and individuals to work and consume” requires a governance framework that can manage experiences across 40,000 locations in 80 countries.
By implementing XLAs, Starbucks can:
- Define clear experience indicators aligned with their ambition
- Monitor these indicators continuously across all locations
- Identify and address areas of “experience anxiety” where customers fail to start, continue, or complete their journey
- Link experience management directly to business outcomes such as revenue growth and profitability
This approach allows Starbucks to maintain consistency in their experience delivery while adapting to local nuances, addressing a key challenge in global experience management (Verhoef et al., 2009).
The Role of the Experience Management Office (XMO)
To effectively implement and manage XLAs, organizations need to establish an Experience Management Office (XMO). This dedicated team is responsible for:
- Analyzing current experience indicators
- Collaborating with design teams to address experience shortfalls
- Creating and applying the XLA stack
- Ensuring alignment between experience ambitions and business outcomes
The establishment of XMOs represents a structural shift in how organizations approach experience management, moving from ad hoc initiatives to a systematic, governance-driven approach (Lemon & Verhoef, 2016).
Addressing the “Gravity of Average Performance”
One of the key challenges in experience management is the tendency for experiences to become commoditized over time, a phenomenon known as the “gravity of average performance.” XLAs provide a framework for continuously monitoring and addressing this risk, ensuring that experiences remain differentiated and valuable to users. (Reeves et.al, 2020)
By separating incidents (temporary disruptions) from problems (systemic issues), XLAs allow organizations to focus on strategic improvements rather than reactive firefighting. This proactive stance is crucial in maintaining competitive advantage in the Experience Economy (Pine & Gilmore, 2011).
Conclusion: The Future of Experience Management Governance
As organizations continue to compete on the basis of customer and employee experience, the need for robust governance frameworks becomes increasingly vital. XLAs offer a comprehensive approach to experience management that links design intentions to measurable outcomes, addresses the challenges of scale, and provides a mechanism for continuous improvement.
By adopting XLAs as a pillar of experience management governance, organizations can move beyond the limitations of traditional metrics and create truly differentiated experiences that drive business success. As the field of experience management continues to evolve, XLAs stand poised to play a central role in shaping the future of customer/audience-centric business strategies.
References
Pine, B. J., & Gilmore, J. H. (1998). Welcome to the experience economy. Harvard Business Review, 76, 97-105.
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Reichheld, F. F., & Markey, R. (2011). The ultimate question 2.0: How net promoter companies thrive in a customer-driven world. Harvard Business Press.
Morgan, Neil A., and Lopo L. Rego (2006), “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance,” Marketing Science, 25 (5), 426-439.
Lemon, K. N., & Verhoef, P. C. (2016). Understanding customer experience throughout the customer journey. Journal of Marketing, 80(6), 69-96.
Homburg, C., Jozić, D., & Kuehnl, C. (2017). Customer experience management: toward implementing an evolving marketing concept. Journal of the Academy of Marketing Science, 45(3), 377-401.
Verhoef, P. C., Lemon, K. N., Parasuraman, A., Roggeveen, A., Tsiros, M., & Schlesinger, L. A. (2009). Customer experience creation: Determinants, dynamics and management strategies. Journal of Retailing, 85(1), 31-41.
Reeves,M., Whitaker,K, Deegan,T. (2020). Fighting the Gravity of Average Performance, MITSloan Management Review.
Pine, B. J., & Gilmore, J. H. (2011). The experience economy (Updated ed.). Harvard Business Press.
Kempf, S. (2021). What are Experience Level Agreements (XLAs)? BMC Blogs.
