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Customer expectations will continue to evolve in 2018 at a rapid pace. This puts the onus on companies to do more and to do it faster than ever before—or risk falling behind.

According to the research firm Forrester, the outlook is bleak for companies that fail to adapt to new market realities, and consumer loyalty is at risk without a strong focus on customer experience (CX).

Beyond understanding customer wants, companies will need to adapt to a slew of technological and regulatory changes to thrive this year. From new European data regulations to advancements in AI and blockchain, Forrester predicts 2018 to be a year of reckoning. Read the report highlights below.

The CX slump

CX hit a plateau in 2017, according to Forrester, and it expects 30% of companies to experience further declines in CX performance this year.

Although CX has become the centerpiece of business strategy as companies adjust to the experience economy, Forrester’s 2017 CX Index found its quality either flattened or declined for most industries and brands. It found CX initiatives tackled “low-hanging fruit to put early points on the board,” but most didn’t have enough clout to force meaningful operational change.

This means the pressure is on in 2018, as Forrester predicts customers’ expectations will outpace companies’ ability to evolve or invent experiences. The deferred transformation in 2017 means brands won’t be able to adjust fast enough or well enough, and further declines in CX performance will translate into a net loss of a point of growth.

Smart executives who don’t want to be a casualty of this decline will commit to making CX an internal disruptive force, with customer trust at the core. However, Forrester says too many executives will continue to ignore evidence of market disruption and put off their transformations until the evidence is overwhelming, further placing their firms at risk at the top of 2019.

The empowered machine

AI is maturing, but it’s no silver bullet for poor CX.

Platforms and associated intelligent agents will collect preferences, behaviors, transactions and emotions to create a rich view of an individual. But customers are also empowered by these technology advancements, and Forrester cautions that this could topple once-sturdy business models. Power has shifted away from institutions to customers.

If brands are to restore some balance, they need to harness the empowered machine. In another research report, Predictions 2018: The Honeymoon For AI Is Over, Forrester predicts 10% of purchase decisions will be guided by a platform’s agent and start the real economic impact of empowered machines in 2018. Getting beyond the honeymoon phase of AI will require hard work, including planning, deploying, and governing it correctly, but its maturation also means better collaboration between people and machines thanks to improved interfaces. It will also facilitate the redesign analytics and data management roles and activities and driving the emergence of the insights-as-a-service market.

Blockchain inches forward

According to Forrester, 80% of blockchain projects failed to meet expectations in 2017—and as a result, the bar may be set lower for 2018. Blockchain promises to enable bold platform and ecosystem strategies while defending against cybersecurity threats. The problem, according to Forrester, is that marketers oversold the technology’s potential last year. Underwhelming results ensued and the research firm predicts limited gains this year. But that doesn’t mean stagnation, with proofs of concept and continued enthusiasm requiring companies to consider operational impact.

The GDPR challenge

Not all trends that brands must grapple with in 2018 are technologically driven. The European Union’s General Data Protection Regulation (GDPR) will be in full force in May and will affect any companies with European customers.

GDPR introduces new customer data rights. Businesses based in the EU, with EU operations, or offering products or services to EU customers will be affected and need to show due diligence. Forrester predicts 80% of firms affected by GDPR will not comply with the regulation in time.

Privacy legislation isn’t new, but GDPR is different in that it challenges how companies balance risk and costs. Full compliance is demanding and expensive, with non- or partial compliance creating extraordinary costs and damage to the brand, Forrester says. Companies are weighing what it means to fully or partially comply. The research firm expects that half of companies will decide not to comply after weighing the cost and risk, and the 50% of those that try to comply will fail.

Ultimately, “the sleeper issue” won’t be compliance but how consumer advocate groups use GDPR to prosecute their agendas by using the regulation’s “right to be forgotten” clause, which could burn through company resources and damage brands.

Be ready to bring your “A” game this year

Forrester is calling 2018 “a year of reckoning” for a reason. It’s the year brands must lead the charge towards customer centricity. Regardless of technology innovation and despite new regulatory compliance challenges, success still comes down to being better at understanding customers through high quality insight to revitalize CX and minimize churn in ever-shifting markets.

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