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This article originally appeared in the December 2014 edition of Dialogue, our monthly e-Newsletter. Click here to learn more and to subscribe.

The New Year is rapidly approaching, giving companies another shot at breaking away from competitors and attracting more loyal customers. Competing solely on price or features is a risky game though—smart business leaders are realizing they can gain a competitive edge by providing a high-quality customer experience. And as the battleground shifts to better customer insights and seamless experiences, companies are dedicating a larger percentage of their marketing budgets to the customer experience.

By 2017, 50 percent of consumer product investments will be redirected to customer experience innovations, predicts Gartner. The research firm also found, in a poll conducted this year, that 65 percent of large enterprises have a chief customer officer or an equivalent role and 58 percent of the time the chief customer officer reports to a marketing role, suggesting that marketing is taking on a broader responsibility for the delivery of customer experiences. As companies analyze their priorities for 2015 and beyond, here are key trends that analysts say are driving the customer experience.

1. The Online Experience Heads to Stores

Customers have long expected retailers to provide seamless experiences between their online and offline stores, and retailers are moving closer to meeting those expectations. Some retailers like Aeropostale have experimented with tablets mounted on walls and smartphone apps that provide videos and photos of outfits, as well as product descriptions and customer reviews. Customers can look at the online content while they’re in the store and buy the outfits while they’re there.

There is also more pressure for companies to streamline their data across different point of sale (POS) systems. As mobile payment systems become more popular, retailers are beginning to look at how the various POS platforms converge, whether it’s through a single platform or a multitude of solutions.

One such company is specialty crafts retailer Porter's Craft & Frame, which needed a solution for combining data between its stores. “Until recently, our two stores operated independently of each other, which meant we were doubling our efforts,” explains General Manager Alex Nielsen.

In September, Porter’s replaced its fixed POS terminals with iPads. In addition, the company is now using iPads with wireless scanners to collect order information when replenishing the store shelves. As a result, store managers spend less time managing prices and creating reports.

On the backend, Porter’s now has a comprehensive view of its inventory and sales across both stores. “The future is cloud-based,” Nielsen says. “Putting our data in the cloud allows us to tie our stores together and be more nimble in how we operate.”

And on Black Friday, when the lines at the checkout counters tend to be longer than usual, Nielsen says the company experimented with sending employees outfitted with tablets to the opposite end of the lines to help customers check out faster and reduce waiting times.

Porter’s Craft & Frame also planned to develop a loyalty program that allowed it to connect its customers’ transactions between its website and stores, in addition to watching the development of mobile payments, Nielsen says. “Now that Apple has come on board,” he notes, “mobile payment is becoming a much more mainstream technology and I think customers will be expecting stores to have it in a year or two so we’re looking into it.”

2. Consumer Data Protection Gets Priority

As news about stolen credit card information, email addresses, phone numbers, and other data breaches pile up, data protection has become crucial. Even when a data breach hasn’t occurred, customers and government regulators are becoming more critical of the ways companies collect, use, and protect consumer data. As Uber, the app-based car service, learned, there is a rapid backlash against companies that appear to take a casual approach to user data.

Uber’s CEO, Travis Kalanick, apologized after a Buzzfeed editor reported that Senior Vice President of Business Emil Michael commented that the company could spend $1 million to mine the personal data of journalists who are critical of Uber. In addition, other incidents have contributed to concerns about Uber executives abusing riders’ personal data, such as the news that another executive tracked a journalist’s use of the service without her permission. Uber has even boasted of its ability to determine when customers were using its service for one-night stands. In a company blog post (which was taken down but still cached here) Uber said it tracked usage rates during Friday and Saturday nights and dubbed certain rides a “Ride of Glory” and the people who take such rides “RoGers.”

“A RoGer is anyone who took a ride between 10 p.m. and 4 a.m. on a Friday or Saturday night, and then took a second ride from within 1/10th of a mile of the previous nights’ drop-off point four to six hours later (enough for a quick night’s sleep),” according to the blog post.

Sen. Al Franken (D-MN) who serves as chairman of the subcommittee on privacy, technology, and the law, sent Kalanick a letter raising questions about the company’s policies around employee training and data sharing. “The reports suggest a troubling disregard for customers’ privacy, including the need to protect their sensitive geolocation data,” Franken writes.

It remains to be seen what the fallout will be from Uber’s PR nightmare, but companies in general are under more pressure to examine their approach to user data, say analysts. “Customers are creating digital breadcrumbs that firms are hungry to use for better engagement and strategic decision-making, but firms are not sure how far they can or should go,” comment Forrester Research analysts Brian Hopkins and Frank E. Gillett in a recent report.

3. Co-browsing Will Ramp Up

Customer service associates and salespeople are increasingly interacting with customers by looking at the same screen on a website whether it’s on a desktop, PC, or a smartphone and “co-browsing” the content. Last year, Amazon introduced this feature to its customers as "Mayday," a live tech support service for Kindle HD products that lets users see and talk to the service agent in a small window on the Kindle screen. Service agents can see the user's screen on their computer and take over the screen to guide users through the issue.

While helping a customer, companies can also use this opportunity to show customers complementary products or provide additional tips to further enhance the customer experience.

4. It’s all About Location, Location, Location

Delivering the right message to the right person at the right time continues to be a marketer’s ultimate goal and vendors are rolling out solutions to make that possible in real time. For example, iBeacon—Apple’s positioning system which uses a Bluetooth low energy signal to allow nearby mobile devices to track its position within a few feet—is gaining traction as a way to provide more detailed messages to consumers.

Marketers are experimenting with the ability to create, manage, and measure personalized in-app messages that are triggered by user behaviors and location data from iBeacons. Marketers can also use iBeacon data to send customized emails to customers based on recent visits to points of interest like retail stores and sports stadiums.

5. The Internet of Things Will Continue to Grow

According to Forrester analysts Hopkins and Gillett, “connectivity will enable competitive differentiation and will transform business models based on service, not just product.”

That will be due in large part to machine-to-machine advances that will continue to improve the customer experience, observes TeleTech Chief Marketing Officer Mark Grindeland. As an example, Grindeland points to companies that are experimenting with embedded RFID and NFC chips in household items. “When you mark produce or juice with RFID tags, a smart fridge will be able to ‘sense’ the items and can let you know when something is about to expire or fill out a shopping list for you when you run out of something,” he notes. “It basically simplifies shopping for you.” As more advanced sensors, networks, and analytics are developed, connected products will provide more optimal user experiences, according to Forrester Research, which predicts that by 2020, firms will be able to connect nearly all products and machines. Within a few years, “firms will have a range of settled tech and standards to choose from for adding connectivity to products, fixtures, and machinery ranging from the home to remote work sites,” write Forrester’s Hopkins and Gillett.

6. Personalization and Context Integrate

Delivering emails and ads that are customized based on the websites consumers have visited, the social networks they use, or the loyalty programs they belong to is quickly becoming the norm in marketing. Facebook, for example, has partnerships with various data firms to enable marketers to deliver targeted ads to Facebook users by matching their customer data with Facebook’s Custom Audiences data.

However, marketers should be mindful of the context in which they personalize their messages to customers, Gartner analyst Jake Sorofman advises. “Personalizing a message just for its own sake [or when customers least expect it] generally has a low value,” he notes. “Whereas using personalization where there is a specific intent, like when a customer opts into a loyalty program, can be very valuable.” A possible strategy is dividing the marketing funnel into varying levels of personalization. “It can be very appropriate to deliver personalized experiences to loyal customers, where your knowledge and insight can deliver value to the experience,” Sorofman adds, “but when you’re doing the same thing to new or prospective customers that can be alienating.”

7. Voice of the Customer Delves Deeper

Marketers can look to customer feedback and sentiment for guidance when customizing their messages. How customers feel about a brand or company has a larger impact on customer loyalty than a product or service’s effectiveness or ease of use, according to Forrester Research. To measure customer sentiment, companies often turn to voice of the customer (VoC) solutions, which are designed to capture customer thoughts and preferences and provide underlying insights.

“Customer experience leaders and marketers are showing a growing interest in listening to customer sentiment, routing those insights to the appropriate personnel, and acting on them,” Sorofman notes.

And while surveys will continue to be a core component of these solutions, companies are looking at other ways to gather insights about how their customers guide business decisions using predictive analytics and sentiment analysis. Expect to see more solutions that include programmatic as well as human (i.e., manual) features, he adds.