Assignment II - CEM

Conceptual Customer Experience Management Model

for Nykaa

Submitted by
Arushi Chauhan
Manvi Taneja
Soumya Raj
Simran Sihag
Divya Naushi

Under the supervision of

Dr. Harleen Sahni

Submitted to

Department of Fashion Management Studies (FMS)

National Institute of Fashion Technology (NIFT)
 Table of Contents

SECTION I
I. 1. Introduction …………………………………………………………………………. 3
I. 2. Customer Experience Management …………………………………………………. 5
I. 3. Definitions of CEM ………………………………………………………………….. 6
I. 4. Importance of CEM ………………………………………………………………….. 6

SECTION II
II. 1. Review of Literature ……………………………………………………………….. 8
II. 2. S-O-R Framework …………………………………………………………………. 11
II. 3. Models of CEM ……………………………………………………………………. 13
II. 4. Brand Background – Nykaa ……………………………………………………….. 19
II. 5. Application of Customer Experience Model by Fatma (2014) …………………….. 27
II. 6. Application of Online Customer Experience Model by Rose et al (2012) …………. 29
II. 7. Research Methodology ……………………………………………………………… 32
II. 8. Proposed Customer Experience Model for Nykaa …………………………………... 42
II. 9. Latest Customer Experience Trends …………………………………………………. 44

SECTION III
III. 1. Customer experience index …………………………………………………………. 45
III. 2. Quantifiers and Metrics for the Proposed Model …………………………………… 46
III. 3. Conclusion ………………………………………………………………………….. 47

References …………………………………………………………………………………….. 49

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SECTION I

I. 1. INTRODUCTION

Ascent of Experience Economy

In 2017, Rihanna, a renowned pop sensation, launched Fenty Beauty - a seemingly sensational
cosmetic brand launch that boasted of a complexion product line in forty shades, catering to every
possible color, undertone, and shade of skin imaginable. Fenty’s online launch is still very fresh
in the minds of make-up fanatics, firstly, because of its sensation with Rihanna, who is hailed as
nothing short of a queen in the world of pop music, and secondly, because it marketed itself as the
first beauty products line to cater to women of all colors.

It certainly was not the first beauty company to brew up this concept of “inclusivity”, but it surely
added a new dimension to it. The world of beauty has so far been classist, elitist, and racist, with
companies catering to black, brown or yellow women very rarely. Fenty Beauty recognized this
scarcity and revolutionized the way we perceived conversations around inclusivity in the world of
cosmetics. Make Up For Ever, MAC, Estee Lauder, Smashbox - are some of the few companies
who have long before dabbled with forty, or even more shades of complexion products for women,
but none of them created an impression like Rihanna did. An exemplary masterstroke - Fenty
became synonymous with curating shades for all, beauty for all, and no races barred approach
through its products.

What distinguishes Fenty from other brands is the element of sensory involvement. It most
definitely did not invent the wheel, but it helps its target consumers feel included, involved and
heard. It forced the world of beauty to take notice and make a slow transition from a service and
goods approach to an experienced approach. It equipped itself with the most neglected aspect of
the industry and utilized it as its competitive advantage.

“Experiences have emerged as the next step in what we call the progression of economic value.
From now on, leading-edge companies – whether they sell to consumers or businesses – will find
that the next competitive battleground lies in staging experiences.” (Pine & Gilmore, 1998)

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 The Progression of Economic Value, Pine & Gilmore (1998)

Experience economy is based on the concept of turning an ordinary product into something
memorable. In such a scenario, the distinct economic offering is, therefore, the experience of
engaging with a product, a service, or a firm, rather than solely the goods themselves. As in the
example of Fenty, there are hundreds of similar products available, but because the company’s
marketing initiatives and conceptual outline focused so much around women of color, it became a
highly sought after, coveted item to purchase. The act of adding a flavor of universality to its
products, and not excluding a certain set of consumers became the backbone of its experiential
offering - it distinguished itself from its competitors as a conversation starter around issues that
previously evaded an entire community of makeup users. As Pine and Gilmore state in their paper,
Welcome To Experience Economy, “An experience occurs when a company intentionally uses
services as the stage, and goods as props, to engage individual customers in a way that creates a
memorable event.”

Experiences are extremely personal and subjective. It is the next wave of economic shift. When
first there was industrialization that gave way to a service economy, there is now the progression
of offering a notch extra through experience economy. Experiential marketing forces a company

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to adopt a competitive advantage by repeatedly asking at different engagement touchpoints with
its target audience, “What more can be done to truly create a memorable, unique and positive
impact?”

The focus of the experience economy is in customer experience management. Again, to quote Pine
& Gilmore, who have perfectly encompassed the soul of experience economy as, “While prior
economic offerings - commodities, goods, and services - are external to the buyer, experiences are
inherently personal, existing only in the mind of an individual who has been engaged on an
emotional, physical, intellectual or even spiritual level.” Because every individual is confined by
his own perception with a commodity, service or good, customer experience is extremely
individualistic and singular in nature.

I. 2. CUSTOMER EXPERIENCE MANAGEMENT

The best way to define customer experience is as the impression you leave with your customer,
resulting in how they think of your brand, across every stage of the customer journey. Multiple
touch-points factor into the customer experience, and these touchpoints occur on a cross-functional
basis. The two primary touchpoints that create the customer experience are people and products.

Schmitt defined “Customer Experience Management is the process of strategically managing a

customer’s entire experience with a product or a company”. Building further on Schmitt’s
definition: “The term ‘Customer Experience Management’ represents the discipline, methodology
and/or process used to comprehensively manage a customer’s cross channel exposure, interaction,
and transaction with a company, product, brand or service”.

Customer experience management (CEM) is the collection of processes a company uses to track,
oversee and organize every interaction between a customer and the organization throughout the
customer lifecycle. The goal of CEM is to optimize interactions from the customer’s perspective
and, as a result, foster customer loyalty. Thus, customer experience management is about more
than serving your online customers. It is about more than knowing where customers shop and what
brand of product they buy. It's about knowing your customers so completely that you can create
and deliver personalized experiences that will entice them to not only remain loyal to you but also
to evangelize to others about you.
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I. 3. DEFINITIONS OF CEM

Table 1: Definitions of Customer Experience Management

Schmitt (1999) The definition by Schmitt presents the customer’s perspective and
states, “experiences involve the entire living being. They often result
from direct observation and/or participating in the event - whether
they are real, dreamlike or virtual”.

Gentile, Spiller, “The customer experience originates from a set of interactions

and Noci (2007) between a customer and a product, a company, or part of its
organization, which provoke a reaction. This experience is strictly
individual and implies the customer’s involvement at different
levels (rational, emotional, sensorial, physical and spiritual).”

Smith and co. The brands that stand out are those that have the courage to pursue
(2013) purpose beyond profit, to engage, entertain and educate their
audiences; and who see their customers and employees as members
of a like-minded community. These brands succeed because they
provide an experience that is not just different, but dramatically
different

I. 4. IMPORTANCE OF CEM

Delivering a great customer experience is hugely important for any business. The better experience
customers have, the more repeat custom and positive reviews you will receive, while
simultaneously reducing the friction of customer complaints and returns.

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● Increased customer loyalty: Acquiring a new customer costs 7 times more than
maintaining an existing one. Wong and Sohal, (2003)in their research on a large chain
department store concluded that service quality is positively associated with customer
loyalty. Authors Bennet and Thiele, (2004) argue that a high level of satisfaction does not
always result in a high level of loyalty. Customers become loyal because of the experiences
they have, as a result of quality control processes and relationship management initiatives
(Garret, 2006). CEM strategy helps to deliver increased loyalty, increased growth, and
financially optimal performance. (Kong, 2011)
● Improve customer satisfaction: A totally satisfied customer contributes 2.6 times as
much revenue as a somewhat satisfied customer and 14 times as much revenue as a
somewhat dissatisfied customer. Several authors have reported the impact of customer
satisfaction on repurchase behavior (Sambandam and Lord, 1995; La Barbera and
Mazursky, 1983), repurchase intent (Anderson and Sullivan, 1993; Cronin et al., 2000).
● Customer trust : Trust has generally been defined in terms of beliefs and behavioral
intentions. For example , Schurr and Ozanne defined trust as “ the belief that a party’s word
or a promise is reliable and that a party will fulfill its obligations in an exchange
relationship “Lagace and Marshall defined trust as “ a person committing to a possible loss
contingent upon the subsequent behavior of a specific other person” Integrating the main
ideas from various definitions ,Mayer et al defined trust as “ the willingness of a party to
be vulnerable to the actions of another party, based on the expectation that other will
perform a particular action. It is important for the trust or, irrespective of the ability to
monitor or control that other party.”
● Brand loyalty: Customer experience management helps to improve Brand loyalty with the
help of better and positive customer interactions, customer satisfaction and customer
goodwill. In the long run, these are assets for any company to grow and build future upon.
● Values: Inculcate the internal staff with better values and importance of Good customer
experience thereby improving the process of customer experience management.
● Better customer advocacy : Propagate the word-of-mouth about the customer experience
thereby pulling in new customers (better word-of-mouth marketing, positive reviews, and
recommendations).
● Differentiate from competitors: As Jerry Gregoire, CIO at Dell, says, “The customer
experience is the next competitive battleground.”

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Thus, the importance of CEM allows to strengthen the brand through a variety of
differentiated experiences for the customer. It can also increase profits through positive word of
mouth reviews.

SECTION II

II. 1. REVIEW OF LITERATURE

Companies have embraced customer experience as a way to obtain sustainable competitive

advantages as argued by Shaw and Ivens. Meyer and Schwager define customer experience as the
internal and subjective response customers have to any contact (direct or indirect) with a company.
(Teixeira, Patrı ́cio, Fisk, & Constantine, 2012). As Pine and Gilmore claim, we have entered a
new phase of economic development and moved from the service economy to the experience
economy. Experiences are gradually replacing services in the same way as services had replaced
products, which had replaced commodities. This process results from socio-economic changes
taking place in the world (mostly in developed countries) such as the rise of the postmodern
consumer (better informed, more involved, more demanding, bored with traditional market
offerings, emotional and rational at the same time), development of information technology
leading to virtualization of consumption, growing affluence of the society, increasing intensiveness
of competition among companies resulting in customization and commoditization of the market
offer.
Proper understanding of consumer expectations and needs in the case of their experiences is
believed to be crucial for companies to operate successfully in the market as they can design the
right tools and undertake the right activities in the right setting with the right personnel, etc. This,
in turn, should result in increased competitiveness and marketing effects such as higher repurchase
rate, customer satisfaction, and loyalty, spreading positive word of mouth, and increased profits.
(Dziewanowska, 2015)
According to Sundbo and Sorensen, the experience economy is a scientific and managerial
concept, which refers to public and private activities leading to satisfying a human need for
experiences. This concept goes beyond culture-related and creative industries and encompasses
the way in which products and services can deliver experiences. In order to understand the
experience economy, according to Giddens, the consumer experience has to be clearly understood:
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it is a phenomenon occurring in the human mind as a result of external stimuli, where it is
processed based on previous experiences, mental needs (e.g. search for an escape from daily life)
and consumers’ individual strategies.
The primary sector comprises industries, whose major purpose is to produce experiences. They are
often called creative industries such as tourism (including hotels and restaurants), entertainment
(e.g. amusement parks), art and culture (e.g. music, theatre), and the IT industry (e.g. producers of
computer games). Here, the experiences are of an expressive nature, and they become a goal in
itself. In turn, the secondary sector of the experience economy comprises companies and
organizations that have different purposes and experiences are merely an add-on feature to offered
products and services which increase their value in customers’ eyes. This approach is frequent in
companies’ activities and it dominates in marketing research (e.g. Schmitt, 1999; Pullman &
Gross, 2004; Verhoef et al., 2009, Brakus et al. 2009). Experiences are treated instrumentally as a
means of achieving particular effects.

Representing the marketing approach to experiences, Pine and Gilmore and Schmitt express the
opinion that today the experience is the basis of market offering that allows to satisfy the needs
and preferences of a contemporary consumer and establish a competitive advantage. According to
Gentile, Spiller, and Noci, the customer experience originates from a set of interactions between a
customer and a product, a company, or part of its organization, which provokes a reaction. This
experience is strictly individual and implies the customer’s involvement at different levels
(rational, emotional, sensorial, physical and spiritual).
The first of the analyzed experience dimensions is the sensory module which has been of interest
to researchers for a few decades. In the early 70s, Kotler coined the term “atmospherics” – a single
word that reflected all elements of the shopping environment influencing the consumer’s behavior.
The affective (emotional) dimension is relatively often investigated in studies on consumer
shopping behavior and researchers’ interest in it was started by Mehrabian and Russell’s PAD
(pleasure, arousal, dominance) model.
The third of the experiential dimensions is the cognitive (intellectual) one. In the literature, there
are relatively few studies on this aspect and they mainly focus on information processing and
thinking styles, e.g. process and outcome-oriented by Pham & Taylor or systematic and intuitive
thinking style by Vinitzky & Mazursky, as well as mechanisms responsible for memorizing and
remembering information, creative thinking and learning processes.

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The next is the utilitarian (functional) dimension of shopping experiences. It deals with
practical/utilitarian aspects of shopping, such as product assortment width, product quality, store
location and display of products on shelves. Focus on this dimension was clearly dominant before
the seminal paper by Holbrook and Hirschman, since when its importance has declined in favor of
the hedonic dimension of consumption.
The symbolic dimension is associated with the role of a brand or a store play in the consumer’s
life. It is common knowledge that products of particular brands complement the consumer’s
lifestyle and create consumption constellations. This area of research includes studies on brand
attachment, brand communities, symbols and rituals associated with brands and consumers’
lifestyles.
In the literature the cost dimension is usually understood as a part of a broader category of
convenience and can include such dimensions as: decision-related (time and effort involved in
making a purchasing decision), accessibility (ease of contact and reaching the shopping location),
transactional (time spent and effort made on finalizing a transaction).
The relational dimension refers to interactions and relations among/with other people present in a
particular shopping situation. Due to factors such as the company’s level of control and consumers’
attitudes, this dimension is divided into two sub-dimensions. Relationships with employees and
contact with other customers are analyzed separately.
The last of analyzed experiential dimensions it the escapist one, reflecting a state of flow, a concept
introduced by Csikszentmihalyi. It is a condition that can be achieved in the case of the optimum
configuration of consumer’s skills and presented challenges. As a result of such a situation, an
escapist experience occurs and the consumer is fully immersed in the experience, loses track of
time, and completely ignores the environment.
Companies have now realized the value of customer journey mapping which actually is the process
of examining how customers view their relationship with an organization. There are two ways to
map customers: a) Internally focused touchpoint mapping b) Externally focused customer journey
mapping. Companies need to focus on “moments of truth” in assessing customer experiences.
According to Peppers and Rogers, “To create superior customer experience requires an
understanding of customer viewpoint. The most important question is, “What is it really like to be
your customer?” (Fatma, 2014)
With the use of social media and mobile, the customers are expecting better service in terms of
responsiveness and potential channels through which to contact the businesses they buy from.

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Bucholtz argues, with the advent of these two media the way customers interact with each other is
changing but more so, the way they interact with business is changing. (Fatma, 2014)
Comparison between online and offline customer experience. The first key difference between the
two contexts is the degree of personal contact, which can range from very intensive in a face-to-
face context to non-existent online. Personal interaction provides a very rich source of contact
from which subjective responses will result. Secondly, differences exist in the two contexts in
relation to the manner in which information is provided. The online context enables the very rich
provision of information, whereas face to face this may be more limited or may occur over a range
of formats (e.g. brochures, posters, customer sales representatives). A third distinction is the time
period. Customers can purchase online at a time and in a place suited to themselves, particularly
now with web access via mobile devices. (Rose, Hair, & Clark, 2011)

II. 2. S-O-R Framework

According to Mehrabian and Russell, the shopping environment contains stimuli (S) that affect
organisms (consumers; O) and result in approach or avoidance response (R) behaviors toward the
store and in behaviors like store searching, intention to purchase, and repurchase intention. This
framework examines the environmental cues (e.g., color, lighting, music, crowding, fragrance, and
layout) and their related influences on customers’ internal states and external responses in retail
store environments (e.g., Eroglu, Machleit, and Davis 2001; Koo and Ju 2010; Mehrabian and
Russell 1974; Richard 2005; Wang, Hernandez, and Minor 2010). Eroglu and colleague’s
application of the S-O-R framework to the atmospheric qualities of online retailing indicated that
the shoppers’ levels of involvement and atmospheric responsiveness mediate the relationship
between environmental cues and shopping outcomes (e.g., site revisit, money and time spent).

McKinney used the S-O-R model to determine that consumers’ internal motivations for Internet
shopping differ and that these motivations have a significant effect on shopping satisfaction.
Richard proposed a new factor, information-seeking, into the S-O-R framework and inferred from
the study’s results that high task-relevant information has a positive influence on consumers’
involvement with a site and their subsequent shopping behavior. Koo and Ju confirmed that online
environmental cues affect customers’ emotions and intentions, and based on the S-O-R framework,
Wang and colleagues showed that there is a significant relationship among web aesthetics, online
shoppers, perceived service quality, and satisfaction. O’Brien pointed out that the online shopper
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is motivated to engage in an interaction with the e-commerce website and, based on the responses
from 802 online shoppers, demonstrated that the hedonic and utilitarian shopping values are the
prominent variables in the online environment. Wang, Minor, and Wei also found that aesthetic
stimuli from the web can evoke online shoppers’ cognitive, affective, and conative outcomes (e.g.,
arousal, satisfaction, purchase, and revisit) in purchase tasks.

Table 2 : A concise summary of authors and their research on the S-O-R framework

Authors Conclusion of the Paper

Mehrabian, A., and J. A. Russell. 1974. An The shopping environment contains stimuli (S)
approach to environmental psychology. that affect organisms (consumers; O) and result
Cambridge, MA: MIT Press. in approach or avoidance response (R)
behaviors toward the store and in behaviors like
store searching, intention to purchase, and
repurchase intention.

Eroglu, S. A., K. A. Machleit, and L. M. Davis. The application of the S-O-R framework to the
2001. Atmospheric qualities of online retailing: atmospheric qualities of online retailing
A conceptual model and implications. Journal indicated that the shoppers’ levels of
of Business Research 54:177–184. involvement and atmospheric responsiveness
mediate the relationship between environmental
cues and shopping outcomes (e.g., site revisit,
money and time spent).

McKinney, L. N. 2004. Creating a satisfying S-O-R model to determine that consumers’

Internet shopping experience via atmospheric internal motivations for Internet shopping differ
variables. International Journal of Consumer and that these motivations have a significant
Studies 28 (3): 268–283 effect on shopping satisfaction.

Richard, M. O. 2005. Modeling the impact of Proposed a new factor, information-seeking,

Internet atmospherics on surfer behavior. into the S-O-R framework and inferred from the
Journal of Business Research 58:1632–1642. study’s results that high task-relevant
information has a positive influence on

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 consumers’ involvement with a site and their
subsequent shopping behavior.

O’Brien, H. L. 2010. The influence of hedonic Pointed out that the online shopper is motivated
and utilitarian motivations on user engagement: to engage in an interaction with the e-commerce
The case of online shopping experiences. website and, based on the responses from 802
Interacting with Computers 22 (5): 344–352 online shoppers, demonstrated that the hedonic
and utilitarian shopping values are the
prominent variables in the online environment.

Wang, Y. J., M. S. Minor, and J. Wei. 2011. Found that aesthetic stimuli from the web can
Aesthetics and the online shopping evoke online shoppers’ cognitive, affective, and
environment: Understanding consumer conative outcomes (e.g., arousal, satisfaction,
responses. Journal of Retailing 87 (1): purchase, and revisit) in purchase tasks.
46–58.

II. 3. MODELS OF CEM

ONLINE CUSTOMER EXPERIENCE MANAGEMENT MODEL BY ROSE et al. (2012)

This model is proposed by Rose et al. in 2012 and is clearly of a different nature than the previous
ones. Firstly, it refers to the online shopping context, secondly, it has been empirically verified and
therefore it goes beyond pure conceptualization. Similarly to Verhoef et al, the authors assumed
that two important components of the customer experience are cognition and affect. They adapted
the S-O-R framework for the analysis and included factors influencing the customer experience
and those resulting from it. It should be noted that experiences occurring in a virtual environment
are different from the “real” ones: there are limited sensory stimuli, fewer elements can be
controlled by the retailer (e.g. consumers can do online shopping at home or at work), therefore
the model comprises elements typical for the computer-mediated environment. However, despite
the fact that experiences are cumulative, the model ignores the influence of other customer and
sales personnel, the delivery of purchased products and any previous experiences a customer might
have.

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The above model consists of three types of elements (Rose, et al, 2012):
● Variables preceding the experience
● Variables constituting the experience
● Variables resulting from the experience

Antecedents of OCE:
The review of the literature highlights a significant number of concepts which motivate and
influence the online consumer.
Information processing is concerned with how individuals use their internal senses and mental
processes to make sense of their world. The twin concepts of prior knowledge and prior experience
are of relevance here.
Perceived ease-of-use (PEOU) and perceived usefulness (PU) appear consistently in the online
consumer literature and there-fore need consideration in the context of OCE. Perceived ease-of-
use and perceived usefulness are a series of features such as a search facility, the responsiveness
of the site, the multimedia capability, and the accuracy and relevance of the information.
The third set of proposed antecedents of OCE relates to skill (SK) and perceived control (PC).
The Acquisition of skill is the customer’s ability to use the Internet with proficiency. This has been
specifically identified as the ability to navigate and interact with a website and links strongly to
the cognitive state of the customer. Perceived control relates to consumers’ feelings about the
degree to which they have control over their own access, search and evaluation of the content of
an organization’s website.

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An emergent area of literature relates to the rewards received by the customer from the use of a
website in terms of perceived benefits (BN) and enjoyment (EN). The positive online shopping
experience is closely associated with attitudes towards the Internet as a shopping medium and its
recognized benefits, with a strong association between perceived benefits and the likelihood of
shopping online. While the purpose of being online for the cus-tomer may be mostly functional
when purchasing, at the same time, we find evidence for the role of enjoyment.
The concept of trust has been extensively explored prior to the development of Internet-based
technologies. This model proposes trust and satisfaction to be outcome variables that both
independently and together have a direct influence on customer loyalty.
Perceived risk has been viewed in terms of two key components: ‘uncertainty and the seriousness
of the consequences of the purchase’. Within the online context, the risk is associated with both
the decision regarding the goods or services being purchased or used and the exchange process
itself (i.e. use of the website).

Consequences of OCE:
This framework identifies two consequences of OCE: customer satisfaction(CS) and repurchase
intention(RI). The framework proposes that CS is a consequence of positive emotional and
cognitive states of OCE and that the final outcome of OCE should be the customer's repurchase
intention towards the website. (Rose, Hair, & Clark, 2011)

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CUSTOMER EXPERIENCE MANAGEMENT MODEL BY FATMA (2014)

The model represents a strategic approach to the creation and management of consumer
experiences, it incorporates both service and product elements and treats experience as a process.

Pre Experience:
This is the first stage in the CEM process. In this stage customers prepare for consumption and
also anticipate the consumption process by first imagining the experience, searching for relevant
information about the type of experience they would want and finally planning and budgeting for
the experience.

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Antecedents of Customer Experience:
Experiences help form attitudes. Attitudes are not stable over time. Good experiences result in
favorable attitudes. However consistent positive experiences reinforce feelings for the brand.
Recall of experience results in attitude towards selected elements of the overall experience and
this influences attitude towards the brand.

● Brand Performance
The product is also the touchpoint likely to create the strongest emotional reaction because it is in
the product experience that brand promise is fulfilled. According to Garrett, the product itself is
the most valuable customer touchpoint, and creating a positive experience here is essential to
building customer loyalty. Customer attitudes are formed by customer experiences which are sum
total of product performance, packaging, and display as well as point of purchase perceptions.

● Multichannel Interaction
The goal of multichannel customer management is customer acquisition, development, and
retention. Multichannel customer management involves the design, deployment, coordination, and
evaluation of all the channels through which the companies and its customers interact.

● Service Interface
The emphasis of academic literature has almost entirely been on the interpersonal dynamics of
service encounters. Some authors like Meuter et al, have focused their research on customer
interaction with technology-based self-service delivery options. Customers experience a variety of
negative emotions when a service failure occurs. Interestingly, customer’s perception plays an
important role here. The type of reaction depends on the customer’s perception of why the service
failure occurred. Behavioral outcomes associated with service recovery, therefore, depend directly
on the negative emotion and indirectly on the customer's perception of the cause.

● Physical Environment
The physical environment is also an important contributor to shaping the customer experience.
Swanson and Davis pointed out that when customers find contact employees more responsible for
the experience, what is delivered is most important for the evaluation of service quality. When
management is thought to be responsible, how service is delivered becomes important.
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 ● Social Environment
The social environment is inclusive of interaction with other customers in a retail setting and is
inclusive of interaction with other customers in online applications, platforms, and media which
aim to facilitate the sharing of content. Social media network is important because there is an
interaction between consumer and community and these result in immediate and interactive
communication.

● Price and Promotions

Although reduced prices are incentives for purchase, there is a direct relationship between
customer experience and pricing effects. Berry et al argue that when companies focus only on
reducing costs to support lower prices and show little or no sensitivity to experiences which
customers have, they may actually be decreasing the value of their offerings. The importance of
sensory experience cannot be underestimated. If customers if burdened with factors like long
waiting lines, disorganized stores, then this can outweigh customer’s ‟s consideration for price.

● Customer Experience
In academic literature, the classification of experiences has been done in different ways. Gentile
et al classified it into sensory, emotional, rational, pragmatic and relational. Berry and Carbone
explained it as the goods, services, or anything else customers can see, smell, taste, hear or perceive
while interacting with service systems constitute clues which directly affects the experience the
customer perceives or forms. Customers experience a range of clues that help them generate a set
of impressions. The impressions that customers have, maybe extremely obvious or subliminal.
They may occur or may be designed. Clues help form impressions that become experiences.
Experiences are reinforced by positive or negative clues. Clues may be performance-based or
context-based. Performance clues are based on the functions of the product or service. Context
clues are more related to atmospherics which involves sight, sound, touch, taste, and smell.
Positive customer experiences can be derived by systematically engineering the clues. Clues also
help to differentiate experiences. If clues are not managed properly they also provide negative
perception.

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 ● Post Experience
After the purchase is made product consumption happens. It could happen that consumption is
made on more than one occasion. Every consumption occasion is another moment of truth. Hence
there could be one or multiple moments of truth. The second moment of truth involves the use,
handling, and actual consumption post-purchase. Since at this stage it involves separation of
purchase and consumption, the benefits that influence customer satisfaction may be different in
the first and second moments of truth. Service firms are now making extensive use of post-
experience survey questionnaires to elicit the feedback of customers on quality, satisfaction and
repurchase behavior to improve experiences. In satisfaction research, consumption emotions are
generally assessed at the retrospective, global level, once the service transaction is over. (Fatma,
2014)

The CEM Consequences:

● Customer Satisfaction: The Immediate Result
● Customer Loyalty: The Important Upshot
● Customer Equity

II. 4. BRAND BACKGROUND - Nykaa

Introduction to Nykaa

Nykaa is a fast emerging market leader and a preferred destination for online beauty and wellness
products in India. As the last word in all things, beauty Nykaa goes beyond just being the biggest
online beauty store.
Derived from the Sanskrit word “Nayaka” that means actress or one in the spotlight. Nykaa.com
is all about celebrating women, celebrating the star in you.
It is about admiring the confidence, strength, and grace with which each and every one.

Nykaa was established in 2012 as an e-commerce website for beauty and wellness and opened its
first physical retail store at T3 Terminal, Indira Gandhi International Airport in November 2015.
It started off as a one-stop-shop for cosmetics and beauty wellness products. It had products from
almost all the brands available in India. It was a venture started by Falguni Nayar, an IIM A
alumnus. After being an investment banker with Kotak Mahindra for almost 19 years, she decided
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to start her own venture, hence the foundation of Nykaa was kept. “Falguni saw that there was a
huge opportunity in the online space and considering all the different areas she could invest in or
start a company, she focused on beauty” – Nihir Parikh, Chief Business Officer at Nykaa.
As a beauty buddy, Nykaa makes life a whole lot simpler by not only providing expert advice and
guidance but also by shipping products right to their doorstep. It has a must-read Beauty and
Makeup Blog - Beauty Book, an ever-growing Expert Portal section with 25 leading makeup
stylists, skin, hair, personal care and wellness experts to answer any questions or concerns one
may have related to beauty, health, nutrition and personal care, a Virtual Makeover tool to ‘try’
and share different makeup looks and a beauty helpline.

Nykaa has grown strength to strength over the years; they have always focussed on customer needs
and worked closely with its brands to achieve the desired results. Sachin Parikh, CFO, Nykaa said
“The only advice I can give to startups is to focus on sustainable growth. You know, I can spend
a lot of money, acquire customers, get a certain level of growth but if the customers are not coming
back or the growth is not sustainable, you are not going to achieve the targets so make sure you
get to sustainable growth.”

From 2016 to 2017, Nykaa has grown by about 350% and this year onwards they are going to grow
on the other 300%. Today they are running at about 600 crore run rate and have got very aggressive
targets, which they are assured to achieve. Nykaa has quickly become the first and foremost choice
when people tend to buy something cosmetic online. According to the primary data collected by
us through a customer survey with a sample size of 50 people, it was found that 44% of customers
use Nykaa to shop for makeup products.

The segment of women to shop from Nykaa

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This is because it is a one-stop solution to everything basic required by a woman. From feminine
hygiene to luxury makeup it has everything. With all these feathers in its cap, Nykaa also promoted
the careers of many YouTube beauty gurus thereby portraying their talent and promoting the career
path to the fullest. The discounts available on Nykaa have saved a lot of pennies many times. If
we compare the retail price to the price at which it is available on the website, It usually has a
significant difference, hence increasing its customer base again.

In other words, Nykaa has proven to be one of the best startups. With its poised and slow and
steady approach, it is about to become one of the best beauty and wellness giants in the market, in
the coming years. It is the epitome of trust, wellness, and care for all its customers.
What is Nykaa?
● Custodians
● Customer-Centric
● Trend Setters
● Inventory Led
● Authentic Products

Vision
Nykaa’s Vision is a framework to celebrate women, to admire the confidence, strength, and grace
through offering thousands of choices of products to choose from the best-curated ones all around
the world at a friendly price with discounts, while to motto being, “Your beauty is our passion”

Mission
Nykaa rests in three ideals-curation, information and personalization, “We bring together the best
offering, to help our customers make the right choice for their holistic beauty needs every step of
the way.”

Advantages and USP of the Brand

They purchase directly from the brands, this helps in getting high commission over the products.
They do not provide discounts themselves, the brands give discounts which do not reduce their
commission. Fast deliveries are an advantage as women rather than going to offline stores prefer
online, the reason is it is cheaper and saves the time of going to the market.
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The USP of Nykaa is providing content that guides customers to make the right selection for their
beauty and wellness needs. “Customers need advice in the beauty segment, for example, the right
foundations for the Indian skin tone, etc.

Product Offerings
With almost 400 curated, well priced and 100% genuine brands and 35,000 products, Nykaa prides
itself on offering a comprehensive selection of cosmetics, skincare, haircare, fragrances, bath and
body, luxury and wellness products for women and men.

● Makeup products ● Wellness products

● Skincare products ● Fragrance products
● Hair Care products ● Men’s products
● Grooming appliances ● A Luxe line for luxury beauty and
● Personal care products fragrance products
● Natural products ● Salon booking services collaborated
● Mom and baby products with Biguine India

Competitors
● Purplle.com : Purplle is an online store which sells cosmetics, fragrances, skin and hair
care products. It is based in Mumbai.
● Truggo : Truggo is an online platform that helps users to book an appointment in salons
and spas. It allows the users to bid an amount that they are comfortable to pay for the
services.

Customer Segmentation
Common characteristics in customer segments can guide how a company markets to individual
segments and what products or services it promotes to them. Customer segmentation can be
practiced by all businesses regardless of size or industry and whether they sell online or in person.
It begins with gathering and analyzing data and ends with acting on the information gathered in a
way that is appropriate and effective. Nykaa’s target audience is in the 22-35 age groups.

As found in the study, women of age 20-25 majorly purchase from Nykaa. The segment of women
attracted to Nykaa would be those who value fashionable/quality skincare, beauty, and fragrance
products and are open to a medium to high price range. Also, there are product sections with richly
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decorated cosmetics that would appeal to young girls. The colors of the store give a look attractive
to professionals.

A segment of women that shopped the most from Nykaa, based on age

The wide assortment of brands, vendor exclusives, and private label combinations would attract
any shoppers looking for variety.

a. Demographic

Women and men aged between 22-25 years of age of middle and upper section of the urban
population of the society, having occupational status either as working or homemakers. Some of
the Luxe products are catered to high professional income earners meanwhile some products being
affordable by the people having a middle-class income.

b. Geographic

Nykaa stores are mostly established in metro cities. Though there are less of the physical stores
and the brand is more available on e-platform, so the products can be delivered anywhere across
PAN-India.
The people based in urban cities are the primary targeted customer.

c. Behavioral

Nykaa uses the customers’ behavioral factor to determine the type of services and products needed
by them, based on their previous purchases, buying habits, and their purchase decisions. The track
is kept, to keep the customer coming back for making more purchasing.
The customers of Nykaa are the ones who are open to a medium to high price range, are also
looking for good quality latest skincare products.

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 d. Psychological

The customers are the ones who are more active in e-shopping rather than shopping at physical
stores. The customers need a good quality experience at the website or the store to make purchases,
for them the determining factors for the purchase are - Trends, Varieties to choose from, Quality,
promises, and discounts.

Modes of Operations and Services

Nykaa is an e-commerce website offering beauty and wellness products from all the leading brands
such as Lakmé, Kaya Skin Clinic, L'Oréal Paris and many more. Nykaa follows an inventory-
based model with warehouses in Mumbai, New Delhi, and Chennai as its offline presence is in 35
stores and expanding. It claims to have over 850+ curated brands and 35,000 products. Along with
this Nykaa has two offline store formats – Nykaa Luxe and Nykaa On Trend. The Luxe format
features Indian and international luxury beauty brands along with Nykaa Beauty, the in-house
collection of beauty products. The On-Trend format is the first of its kind in the market with
products curated by category basis their popularity. In March 2016, Nykaa introduced private
labeled products in the bath and body care category.

The key to the right business is the ability of a brand to actually build up trust among its customers.
With the introduction of new customers every day, it is also important for a business to flourish
when its customers come back. This trust by Nykaa has been developed by delivering 100 percent
authentic products delivered to the customer on time. “We positioned ourselves as an inventory-
like model that was focussed on giving the best possible customer experience instead of an
eCommerce marketplace. We control the quality and customize this experience, which led them
to trust us,” Falguni.

Nykaa is the Pandora of products ranging from budget-friendly category to high luxury brands.
Nykaa has started collaborating and introducing Non-Indian brands like HUDA Beauty, Kiko
Milano, Wet and Wild, etc which is an achievement in itself. This has made Nykaa the hoarding
spot for all the makeup enthusiasts who can now get their hands on the products which were not
available in India earlier.

With the amalgamation of all these techniques and business strategies, Nykaa created a huge
customer base for itself. This served as an advantage when it introduced its own makeup and
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skincare line in the market. With the A-Class quality products, it won the hearts of many makeup
users who now had the option of a budget-friendly makeup line with the exact quality of some of
the renowned luxury brands in the world.

For Falguni, the consistently upward growth is credited to ‘The Art of Retailing.’ She adds, “To
buy beauty online, one needs advice. What to buy, how to buy it and how to wear it once you buy
it. When you walk into a Sephora, they walk you through a range of ideas and solutions – that is
what we focussed on.”

They did this through a number of channels and mediums. The Beauty Book – the first stop for
one of Nykaa’s core target audience – the 22-35 age group who wanted advice on how to wear
makeup and were tech-savvy on all social media channels.

At first, they focussed on amassing content through blogging and sponsored posts that were
basically product reviews, customer advice and more. They also experimented with multi-brand
videos and pictures, at first outsourcing the content to produce makeup tutorials, how-to vlogs with
anecdotal and experiential value.

The Art of Retailing also encompassed having extremely clear communication with the customers,
through transparency, and engaging customers with the right mix of discounts and quality
products. On the marketing front, they refined their strategy and at the moment, 75%-80% of their
customers are organically acquired.

Business Model Of Nykaa

● Nykaa deals in high- end products from brands like MAC, Lakme, etc.
● The value of these products is high.
● It implies that the value of the commission is also high.
● Nykaa with its website has taken it to a different level.
● Nykaa ships in the entire country to almost every zip code.
● They use the services of leading courier companies like e-com express, delivery, etc.
● Today, Nykaa sells more than 35,000 products from 650 brands.
● The products of Nykaa include both international and Indian, luxury and mass.
● They are constantly adding new labels to its stock.

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Nykaa is one of the rare companies which follow an Inventory based E-commerce model. Nykaa
has adopted an inventory model where they collect all the items at one place in an inventory and
process the order according to the products available in the stock. This ensures that all the bulk
orders are received at once instead of one item at a time, which is the case with Flipkart or Amazon.
This is a fresh approach that served many benefits with it came to earning the trust of its reiterating
customers.

Inventory Model
The company stores the stock of goods purchased directly from manufacturers. They store the
products in their warehouses. Nykaa’s business has warehouses in New Delhi, Mumbai and
Bangalore, the products are sold directly from there. In this, the profit margin is high. The
responsibility of any damage lies with the company. They achieved their breakeven after 5 years
of operations. Initially, the cost to acquire a customer
was Rs. 1000 which has now reduced to Rs.200-300. Nykaa has its offline presence in 35 stores.
Nykaa has two store formats – Nykaa Luxe and Nykaa On-Trend. The Luxe format features luxury
beauty brands and the On-Trend format features curated products by category based on their
popularity.
The company achieved a break-even point in 2017, After which what it received was profit. Last
year, the revenues accounted for 214 crores which now has increased to 570 crores.The company
decided not to launch their IPO until profits reach 200 crores. The company is still a private
company, the costs include the salaries paid to employees, maintenance costs and the marketing
costs.

Nykaa is an omnichannel retailer and uses a mix of frameworks for their customer experience
management. Apart from being primarily an e-commerce website, Nykaa also retails through two
kinds of storefronts, Luxe and On-Trend stores. While Luxe features specifically luxury beauty
products, perfumes, and Nykaa’s home brand goods, On-Trend store stocks curated inventory of
the most trending products of the website. Nykaa regularly features behind the scenes and focused
content on its social media channels, conducts “give-aways” and contests on the said portals.
At its offline retail points, it hosts makeup days in collaboration with a brand or two and depending
on the partnership or occasion, customers can walk into the stores and ask for a free make-over,
manicure, or blowouts. Other than that, it also hosts make-up classes in malls across the country

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featuring internet bloggers and make-up artists who teach make-up and beauty tricks to customers
free of costs in a formal gathering, free of cost. Nykaa’s website boasts of functions such as “Try
It On” where customers can upload their photographs and try before they buy virtually how a
particular product would look on them. Additionally, verified buyers can add reviews, ratings and
other information related to a particular product and convey their satisfaction level, thereby in the
process, helping others to make a decision about a purchase as well.

Ratings given to different experiential elements, as found in the survey and during the store visit.

II. 5. APPLICATION OF CUSTOMER EXPERIENCE MANAGEMENT MODEL BY

FATMA (2014)
The model proposed by Fatma in her literature review in 2014, dives into approaching customer
experience strategically. It incorporates both service and product elements and treats the
experience as a process. The model is devised of three stages of the customer experience that we
will be applying to Nykaa and studying it.

● The Pre-Experience Stage: As the name suggests, this is the stage prior to deriving an
experience through a purchase or service. In this stage, the customer goes into a mode of
awareness by researching. This research will lead to activities like imagining the
experience, searching for relevant information, planning, and financial preparation. This
stage might not seem to be directly controlled by a company, but it does play an important
role. Nykaa, being the largest makeup company makes it easier for the customers during
the research phase, as it is successful in providing a huge chunk of information that helps
the user to sift through other makeup brands. Since, it targets a large customer segment,

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 irrespective of their financial condition, it is easy for users to find the right product in their
budget. During this stage is where the customer might look for the relevant brand
performance that might affect their perception of the brand. Nykaa has both positive and
negative reviews that come into the picture, that might lead to being an imperative pre-
purchase factor for many customers. The brand performance really decides the image of
the brand that decides the type of customers that want to associate with the brand. Next is
the multichannel interaction, Nykaa operates primarily through online retail and devotes a
segment to offline retail as well. So, the customers can have both a wholesome online and
offline experience. The service interface offers deliverance of services to the customers. A
bad service interface can tick the brand off in a negative light. Nykaa is well-renowned for
its service quality, both online and offline. Nykaa provides a seamless and brisk delivery
experience to the customers. The physical environment is important in setting the right
mood of the customer. Nykaa employees tend to be really helpful to the customers in issues
resolution, providing the right product knowledge, guiding the customer through the store
leading to good customer experience, as the staff is majorly important in shaping the
customer experience. Moving forward to the social environment, the interaction of
customers with other customers. Nykaa enforces this through its vast online community
both on its website and mobile app. This keeps the user engaged in various activities and
contests. Nykaa has an active online community that they keep engaged through their
YouTube channel, on which they collaborated with several beauty influencers. Pricing
when it comes to Nykaa is really economical and it entails a huge price range that helps
customers of all financial status to make an easy purchase. Promotions at Nykaa consists
of affiliate marketing (NAP- Nykaa Affiliate Program), PR, celebrity endorsements, and
many more such marketing strategies.
● The customer experience is personal, subjective and multidimensional in nature and it is a
source of value for the customer (Schmitt, 1999; Pine & Gilmore, 1999; Pine & Gilmore,
2011; Gentile, et al., 2007). It is a complex amalgamation of aspects directly and indirectly
under the control of a company. Nykaa strives to achieve this by providing a wholesome
customer experience that leads to their customers feeling satisfied after a store visit or even
browsing through their website through Nykaa’s keen attention to every individual
customer’s needs.
● A post-experience phase comprises emotions felt (e.g. joy), remembering and reliving the
experience (Schindler & Holbrook, 2003), imagining alternative scenarios, and may be
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 connected with learning and development of new skills. On interaction with several Nykaa
customers, it was taken into account that the Nykaa experience is what has made the brand
so successful. The customers are left with a sense of satisfaction and joy leading to an
increased rate of purchase intention. Customer satisfaction is one of the major determinants
for brand loyalty and Nykaa seems to capture just that.

II. 6. APPLICATION OF ONLINE CUSTOMER EXPERIENCE MODEL BY ROSE et al.

(2012)

The model proposed by Rose et al (2012) is completely different than all the other previous models.
It refers to an online shopping context and is empirically verified. The model is adapted from the
S-O-R framework and includes factors that affect customer experience and those resulting from it.
The OCE construct is assumed to be composed of both cognitive and affective states. The model
is divided into three parts namely antecedents, experience and consequence.

Antecedents:
● Information processing is concerned with how individuals use their internal senses and
mental processes to make sense of their world. While shopping online, customers decide
whether to purchase a product or not by evaluating the information available on the
website. Nykaa, primarily being an online brand delivers information through its website
in a precise manner. Every product as product information details and customers can know
the brand, shade, size, usage, etc. Customers can obtain additional information from the
reviews given to each product by other customers. In addition, the website has a chat option
which is known as the Beauty Assistant.
● Perceived ease-of-use and perceived usefulness are important factors to evaluate the
quality of a website. The perception of how easy a website is to use is extensively linked
to a positive online experience. Multimedia ability, search facility, responsiveness of the
website, and the accuracy of information from the website influence online customer
experiences. Nykaa provides accurate search functions on both websites and mobile
application. Moreover, customers can find online customer service through Beauty
Assistant (chat support) for help.
● The acquisition of skill is the customer’s ability to use the Internet with proficiency. This
is the ability to navigate and interact with the website. Navigating through Nykaa’s website
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 and application is easy. Although using the application is easy, customers do need a certain
skill to use their website. Perceived control relates to consumers’ feelings about the degree
to which they have control over their own access, search and evaluation of the content of a
website. Due to the increase of online information, limitations of consumer cognitive
ability, and the decrease of spare time, consumers desire to control their own access, search
and evaluation. Control can also be viewed in relation to the security and privacy of the
website. Authentication, confidentiality, privacy protection, and payment protection are all
part of control with respect to privacy and security. Navigating and ordering through
different media according to the convenience gives customers the required control. Being
able to share knowledge about the products through product reviews also plays an
important role in perceived control. In addition, the products can be saved in a wishlist or
cart and purchased later when there is a good offer. With respect to privacy and security, it
ensures safe online payments.
● Trust Propensity is an outcome of a number of attributes of the purchase environment,
which could affect customers’ emotion state and their online experiences. Vulnerability
and fear of the unknown is often cited as a situational or contextual component of trust.
Nykaa offers regular discounts, offers and purchase reviews of each item to browsing
customers for better selection. In addition, the influencer marketing program helps
customers know about the quality and usage of the products and assert trust on some level.
Within the online context, perceived risk is associated with both the decision regarding
the goods or services being purchased or used and the exchange process itself (i.e. use of
the website). Risk of selecting goods is affected by fake evaluation or information that
deviates from reality, leading to consumers buying products of low quality. So it not only
influence consumer satisfaction but also their re-purchase intention.
● Positive online shopping experience is closely associated with attitudes towards the
Internet as a shopping medium and its recognized benefits, with a strong association
between perceived benefits and likelihood of shopping online. Customers generally link
perceived benefits to brand commitment. Customers generally link perceived benefits to
brand commitment. Nykaa provides offers and discounts on a regular basis which gives
this sense of perceived benefits to customers as they usually get products at a cheaper price.
The seamless delivery experience and cash on delivery also add to this. Customers’
intention while shopping online is mostly functional, however they do derive some

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 enjoyment out of it. Nykaa holds online lottery contests like spin the wheel to maintain
interaction with the customers through enjoyment.

Experience:
● Cognitive state refers to the conscious mental processes and thinking of the customers. It
arises from direct interaction with the website such as telepresence, challenge, skill and
interactive speed. Antecedents like information processing, skill and risk influence the
cognitive experiential state. Part of the assessment of the customer encounter is relatively
goal-directed and involve rational processing of information regarding the encounter which
is ultimately stored in memory. Information about the products, challenges while using the
interface, skill required etc. on Nykaa’s website and mobile application affect this
experiential state and influence customer satisfaction and repurchase decisions.
● Affective state refers to the customer’s mood, feelings and emotions resulting from the
experience. It is directly influenced by web aesthetics and perceived benefits (e.g.
convenience, time and money saving). Hansen defines emotion as a response to a stimulus
and, in the online context, the stimulus would be the components of the website to which
the customer is exposed. It has been suggested that affective, emotional processing leads
to longer term associations in the memory. In case of Nykaa, the affective experiential state
is influenced by the perceived control upon connectedness i.e. ability to share knowledge
about a product through reviews, ease-of-use due to easy navigation and perceived benefits
such as regular discounts.

Consequence:
● Customer satisfaction is a variable resulting from the overall experience of the customers
with the brand. Nykaa has mostly been successful in satisfying its customers. As found in
the study, 30% of the customers use Nykaa whenever they are shopping for makeup.

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 The segment of women who use Nykaa while purchasing cosmetics

However, there are some factors that were found in the study which customers think can be
improved such as, delivery time, more offers, more organic products offerings and availability of
international brands.
● Repurchase intention is another important variable resulting from the overall customer
experience. The customers tend to buy again from the brand if they are satisfied with their
previous purchases and delighted with the past experience. Nykaa has provided a good
overall experience to its customers so far and with their perceived benefits such as
availability of different makeup brands on one platform and attractive discounts and offers,
it has been able to create increased rate of repurchase intentions.

II. 7. RESEARCH METHODOLOGY

Determining an effective customer experience model without being in touch with the actual
customer base seems as out of place as a cart without wheels. For the proposed CEM Model for
Nykaa, the primary data is collected through a two-pronged approach - a small survey and store
visits. The method of conducting the survey was through a short questionnaire which was
disseminated online. According to Schmidtt, ‘experiences’ originate during the customers’
interaction and transaction with the brand or the company and its products or services, through the
cross-channel exposure due to the emergence of different types of values. (Schmitt, Experiential
marketing, 1999)

The rationale behind developing the questionnaire was to delve deeper into a customer’s psyche
through the various touchpoints of interaction between the company and the customer themselves.
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It was incorporated with the classification of customer experience as proposed by Gentile, Spiller
and Noci, across sensory, emotional, cognitive, pragmatic, lifestyle and relational aspects.

The sample size, due to dearth of time was limited to only 50 people. The research was conducted
online because Nykaa is primarily an online brand, with stores scattered across the country, hence
travelling everywhere was time and cost intensive. People who usually indulged in retail
experiences online, and lived in cities where Nykaa already had a store were approached. The
questionnaire featured both open and close ended questions. For some questions, an informal tone
was adopted to bring out the honesty and evoke genuine reactions. It was also done to add a touch
of relatability with the 15-20 crowd, who were not out of school and were most likely participating
in a research survey for the first time. The sampling method was stratified - and the basis of
stratification was if
a. the person had purchased cosmetics online
b. the person had used Nykaa at least once
c. the person had visited Nykaa store to experience the ambience

The idea sampling group comprised of people who converged on these three spheres.
The second mode of collecting primary data was through store visits, wherein not the Nykaa stores
were visited individually by each member of the group to form unbiased opinions of the store
atmosphere at different locations in the country, and collectively as a group in the nearest outlet
available to reflect holistically as a group. Nykaa Luxe at Alpha One Mall, Ahmedabad was visited
as a group and Nykaa On-Trend stores in Delhi, Mumbai, and Ghaziabad.

Questionnaire

1. Name:
2. Age:
❏ 15-20
❏ 20-25
❏ 25-30
❏ 30-35
❏ 35-40
❏ 40 and above

3. Email Address:

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4. How frequently do you shop for makeup?

❏ Monthly
❏ Once in 2-3 months
❏ Bi-annualy
❏ Once in a year
❏ Very rarely

5. How frequently do you shop for makeup online?

❏ Monthly
❏ Once in 2-3 months
❏ Bi-annualy
❏ Once in a year
❏ Very rarely

6. Have you ever used Nykaa to purchase cosmetics?

❏ Yes
❏ No
❏ Sometimes

7. How did you first hear about Nykaa?

❏ Online
❏ Advertisements
❏ Through a friend
❏ Saw the store and walked in
❏ Never heard about it

8. Do you prefer their

❏ Website services
❏ Store services
❏ Both
❏ Neither

9. Do you research before buying cosmetics?

❏ Yes
❏ No
❏ Sometimes
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 10. Do you like the website interface?

❏ Yes
❏ No
❏ Can be improved

11. Which product category do you mostly buy from Nykaa?

❏ Skin care
❏ Hair care
❏ Cosmetics
❏ Fragrance
❏ Appliances

12. Where do you usually buy cosmetics from? Tick all that apply.

❏ Local stores
❏ Special brand outlets
❏ Online websites
❏ International brand websites such as cultbeauty, beautybay, beautylish
❏ Usually gifted cosmetics by friends/family
❏ Multi-brand outlets such as Shoppers Stop, Lifestyle, Pantaloons, Central

13. Rate the following if you have ever purchased from either the Nykaa store or website

Staff’s helpfulness Very Good Good Average Poor Very Poor

Visual layout of the store Very Good Good Average Poor Very Poor

Website Interface Very Good Good Average Poor Very Poor

Ambience of the store (music, light, Very Good Good Average Poor Very Poor
etc.)

Advertisements Very Good Good Average Poor Very Poor

Product range (store) Very Good Good Average Poor Very Poor

Product range (website) Very Good Good Average Poor Very Poor

Discounts online Very Good Good Average Poor Very Poor

In store offers Very Good Good Average Poor Very Poor

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 Influencer marketing Very Good Good Average Poor Very Poor

Information related to new launches Very Good Good Average Poor Very Poor

Social media content Very Good Good Average Poor Very Poor

Authenticity of the products Very Good Good Average Poor Very Poor

Cancellations & refunds Very Good Good Average Poor Very Poor

Delivery process and time Very Good Good Average Poor Very Poor

14. What was your overall experience of the store?

❏ Good
❏ Bad
❏ Can’t say
❏ Improved

15. Do you usually find what you’re looking for at the Nykaa website/store?

❏ Yes
❏ No
❏ Sometimes

16. How was your overall experience of the website?

❏ Good
❏ Bad
❏ Can’t say
❏ Can be improved

17. Could you kindly tell us why you chose Nykaa over other websites/beauty retailers?

18. And finally, please tell us if there's anything that could be done to improve your overall
experience with the brand?

Outcome
The survey gave diverse insights into the psyche of the average customer that visits the Nykaa
store. These aspects formed the crux of the model proposed. If a certain characteristic stood out
amongst others in the survey result, the causes behind it were focused.
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According to the survey, around 36 out of 50 people rated Nykaa’s in store experience as good or
very good, putting it in an umbrella bracket of positive affirmation. While 16 people voted it as
very good, 20 people voted it as good and the rest were either neutral, or expressed negative interest
towards it. Additionally, when asked if they preferred more - shopping online from their website
or visiting their offline stores, following response was received-

Preferences expressed by Nykaa customers for their online & offline retail channels

About 34% of people voted in favour of both, 28% of people liked visiting offline stores only, and
32% of people preferred to shop only online. Overall, this showed a willingness to visit the Nykaa
stores, and cumulatively, visiting the Nykaa stores evoked a sense of excitement, anticipation of
future purchases, and satisfaction in the minds of the customers.

Nykaa is primarily an online store dedicated to beauty and wellness products. It being online allows
it to penetrate in remotest areas of the country and deliver goods to its customers at just a click
away. However, accessibility would also branch out in this case to involve locations where Nykaa
already has a store-front.
As of now, Nykaa boasts of almost 35+ stores with currently an intention to expand further. Nykaa
also has over one lakh different products from around 850+ brands that make it the one-stop
destination for people from all ages to get just what they want. In the questionnaire, questions such
as rating the website layout, or product range of the company were included before affirming that
this was an important aspect of customer experience.

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According to the survey, “Staff’s Helpfulness” was rated as a highly important aspect of a positive
customer experience in the Nykaa stores. 62% of people expressed a positive response when it
came to Nykaa’s in-store experience. Additionally, Nykaa uses a ticketing system to resolve
queries, refunds within a week, and makes an effort to reach out to the customers online through
social media and through beauty events such as make-over days once a week.

Trust denotes the intention to repurchase, and the conviction in the product and service quality
provided by the brand itself. When asked the customers why they prefer Nykaa over other e-
commerce portals that sell cosmetics, around 87% people replied that quality, offers, variety in the
range, authenticity, convenience in shipping and delivery, and brand image became the biggest
aspects of trust for them choosing Nykaa over and over again. Nykaa has a distinct brand-image
in the eyes of the customer and take efforts in bettering its relationships through various initiatives,
which strengthens a customer’s intention to re-purchase from the company repeatedly.
Furthermore, when asked if they use Nykaa to purchase cosmetics, the overall response was-

Frequency of cosmetics shopping as done by customers using Nykaa

44% of people said they use Nykaa everytime they shop for cosmetics, as compared to a 20%
which responded with a stark no, which 36% of people responded as being infrequent shoppers
when it came to cosmetics and using Nykaa.

Nykaa utilises the benefits of technology in a lot of ways. Apart from a full fledged, every
expanding website, Nykaa also functions through an app. Additionally, Nykaa has collaborated
with Shoppr.io, a curated service provider that integrates links in your Instagram photographs to
help you shop directly, by just clicking on the post itself. This helps the customer to not interchange
between apps, and enjoy their social media content at the same time. 58% of people enjoyed
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Nykaa’s social media content, and 72% of people voted Nykaa’s website interface as being “good”
or “very good”, with 55% of the people voting it as “very good”. Nykaa’s website interface was
cited as “easy to use” and “smooth” by multiple participants as well. In today’s time when brick-
and-mortar stores are becoming more and more conceptual, thematic and focused, technology
becomes an effective tool to stand out amongst your competitors by distinguishing your services,
spreading the good word of mouth, and engaging with your customers.

With companies aiming to stage experiences that make them stand out. The aspect of convenience
seeks to ask questions such as if the customer find what they were looking for, how easily they
found the products they were anticipating to find and how easily the products were purchased from
their website, how effectively the shipping, delivery, cancellations and refunds were handled. The
participants cited as quick delivery, availability of diverse products, discounts and offers as highly
rated factors in distinguishing Nykaa as their preferred brand to shop from. 74% of participants
called its product range “good” or “very good”, and 64% voted its shipping and delivery policies
as good, or very good. Quality assurance was again an important point of satisfaction in the minds
of the customers.

Empathy as an aspect focuses on the company's focus on making its target audience at ease and
delivering services along with products that strengthen their assurance in the customer’s mind. As
stated by Pine and Gilmore in 1998, companies now have to stage experiences apart from their
economic offerings which helps the company stand out, and it maybe through its services, store
ambience, or a unique experience, or all. Nykaa’s fast processing system pays emphasis on
resolving customer issues quickly, and store staff were responsive, polite, and helped the
customers look for their desired goods at multiple levels. Nykaa’s beauty chat services functions
somewhat similarly but in a virtual realm.

Other than the above, some aspects that were discriminated by the customers as needing
improvements. Availability of better offers or discounts, pricing for some products, presence of
more international and/or organic brands, more information about the products, and better
classification online for the product range were some common areas that were repeatedly
highlighted by the customers. Another aspect that could be further improved was the website
interface, as it might seem a bit cluttered or overwhelming to the user. This calls attention to that

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small margin of improvement, which can make service delivering from excellent to exceed
expectations, thereby marking it as a hallmark of customer experience management.

Gaps Identified In Existing Customer Experience Management Model of Nykaa

The customer experience gap is essentially the gap between what customers want and what
organizations actually give them. A few gaps in Nykaa’s existing CEM model were recognised
through the customer survey and as Fatma’s consumer experience model (2014) and Rose’s online
experience model (2012) were applied to it.

Some gaps that were identified were in the following areas through the survey -
1. Information - related to inventory and stock updates
2. Range - related to product range and including more global brands, organic products, etc
3. Responsiveness- help or support regarding adroitness on the part of the company to deliver
prompt guidance, help, or response.
4. Interface - relates to the experience of using the app or website with an intuitive interface,
which can be a big determinant in engaging customers for more sales, or repelling them
due to rough design edges.
5. Convenience - related to the consumer experience pertaining shipping, deliveries, refunds
and cancellations, store locations and availability of the company’s economic and service
offerings, discounts that are more frequent, offers and sales.
6. Environment - It was a common beat of feedback related to both online and offline layouts
which were regarding the store layout, the online interface and fluidity of usage, product
placements and applicability of offers and availing sales within the stores, ease of
movement, in-store environment, and overall ambience of the stores.

Positive Attributes In Existing Customer Experience Management Model of Nykaa

On the other hand, there were some characteristics of Nykaa customer experience which were
highly praised and stood out amongst others. These, however, also converged with the same points
that some participants gave feedback on, therefore proving again, that customer experience is a
highly individual, personal and subjective process. These were recognised in the following areas–

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1. Popularity - A lot of participants added that they chose Nykaa because of the brand image
and how it had a distinguished reputation for being the one-stop shop for everything related
to beauty and wellness.
2. Range - While previously some customers were unhappy with the range, and wanted to
improve it by a minute margin, some customers were satisfied with Nykaa’s product
offerings and chose it over other contemporaries because of the conviction that what
they’re looking for will be found on the website or at the store.
3. Relationship - This refers to the brand’s relationship with the customers built through its
experiential offerings and consistent assurances. Nykaa’s online presence, promptness in
resolving customer issues, and transparency have stood out as its salient features which
compel its target audience to choose Nykaa over other e-commerce portals.
4. Convenience - Preference related to Nykaa’s shipping, delivery, store locations, offers,
sales, discounts, availability of what the store was looking for, both online and offline,
presence of latest brands on the platform, and more.
5. Interface - According to the survey, a lot of people chose Nykaa because of its user-
oriented website/app interface design. It helped the customers to compare products, read
reviews and ratings before a purchase, look for the best offers, and choose products based
on psychographic and behavioral preferences.
6. Environment - This area largely deals with the customer’s in-store experiences, how they
felt in the physical store, were they welcomed, did they find out what they came to buy,
did their visit instigate any sales, was the ambience of the store good and how elementary
it is to the overall perception a customer has about a brand.

GAPS CONVERGENCE QUALITIES

Information Range Popularity
Responsiveness Interface Relationship

Convergence identified in customer experience management model of Nykaa

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On the basis of the primary data analysis, the above areas were cited as highly important, which
can be further clubbed into the following ways -
● Empathy - Responsiveness, support, providing relevant information, promptness
expressed by the company towards consumers in resolving issues.
● Relationship - brand image, popularity, relationship & trust built with the consumers
● Technology - Website design and interface, data automation based offer allocations,
intuitiveness of the app and efficacy of e-commerce portals in both increasing sales and
generating a smooth retail experience for consumers, adoption of latest developments in
the technological front with respect to customer experience development.
● Environment - Store environment, availability of required stock, range of inventory,
staff’s helpfulness, billing experiences, in-store ambience and experiences created through
offline promotional activities.
● Convenience - store location, shipping, billing, delivery, availability of offers, discounts
and regular sales as a customer retention strategy, regular expansion in the range of
products available, etc.

11.8. PROPOSED CUSTOMER EXPERIENCE MODEL FOR NYKAA

The model is classified into four parts namely, purchase intention, pre-consumption, customer
experience and post experience which ultimately result in consequences like customer loyalty,
satisfaction, re-purchase intention and customer equity.

● Purchase Intention: The intentions of the customer are often premeditated. In this stage,
the customer is becoming self-aware before entering a retail experience. Here, we can have
two types of customers, i.e. those who will be interacting with the brand for the first time
and those who have already interacted with the brand. Searching, awareness and budgeting
are the key aspects a customer keeps in mind before going forward with an experience.
● Pre-consumption: A well-connected omnichannel interface was recognised as the key
determinant to a holistic customer experience. Since, Nykaa primarily has more online
presence along with retail, our model tends to be an amalgamation of both retail
environments. The important facets of retail space are physical environment, social
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 environment, brand image, inventory, skilled personnel and data insights. Whereas those
for online space are aesthetics, ease-of-use, security, social environment and data insights.
Some common aspects that exist in both offline and online retail environment have been
carefully linked to the ‘Past Experience’ facet in Purchase Intention stage.
● Customer Experience: The stage where customer derives satisfaction out of indulging
into an experience with a brand is the customer experience stage. Here, the various types
of customer experiences are defined by seeking inspiration from customer experiences
defined by Gentile, Spiller and Noci in 2007.
● Post Experience: The sense of enjoyment, nostalgia, skills acquisition associated with a
customer experience are defined in this stage. This leads to the customer fantasizing and
gushing about the experience so much that they end up becoming loyal customers, plan
their next experience with the brand and providing value in terms of customer equity to the
company.

Proposed Customer Experience Model for Nykaa

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11. 9. LATEST CUSTOMER EXPERIENCE TRENDS
Table 4: Latest customer experience trends
1. AI will disrupt the
customer experience.
2. Voice commerce for the
experience economy.
3.
Increase emphasis on the
employee experience.
4.
Making use of predictive
analysis.
5.
The advent of virtual
reality.
According to studies, nearly 66% of customers switch brands
due to a lack of proper customer service. Artificial
Intelligence is the key to providing an ultra-personalized
customer experience that will help the brands empathize with
every type of customer.
Voice assistant technology is already showing strong rates of
adoption. According to OC & C, voice commerce sales in the
US are expected to reach $40 billion in 2022, up from $1.8
billion in 2017.
Numerous research studies show a strong correlation
between employee experience and customer experience. One
study highlights that companies with highly engaged
employees outperform their competitors by 147%. Hence, it
is important to lay emphasis on the experience of employees
too.
Predictive analytics will play a crucial role in optimizing
marketing campaigns in helping brands determine consumer
responses and improve operations by forecasting inventory
and manage resources
Experiences aren’t meant to sell products like they are
products themselves. Virtual Reality has become the new
boom in retail space providing users to experience an
alternate reality to get a feel of what they’re going to invest.
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SECTION III

III. 1. CUSTOMER EXPERIENCE INDEX

There could be different ways and tools to measure Customer Experience. The first measure is the
Brand Experience Scale developed by Brakus, Schmitt and Zarantonello in 2009. The theoretical
basis for the Brand Experience Scale stems from the concept of Strategic Experiential Modules
(Schmitt, 1999). The second one is Customer Experience Index (CEI) developed by Kim, Cha,
Knutson and Beck (2011) and is applicable in service context, it dwells on the concept of
expectations, perceived service quality and value and satisfaction. The Brand Experience Scale
focuses on consumer’s internal processes, whereas Customer Experience Index focuses on the
aspects controlled by the company.

The following factors to measure the customer experience index are proposed inspired by Kim,
Cha, Knutson and Beck in 2011. The following are the service indices, chosen to focus on, in order
to measure the rate of customer satisfaction derived through the proposed customer experience
model for Nykaa.

Indices for measuring customer experience

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III. 2. QUANTIFIERS AND METRICS FOR THE PROPOSED MODEL

To understand and report on the effect of the proposed CEM model on customer loyalty,
combination of Net Promoter Score (NPS) and Customer Satisfaction (CSAT) can be used. The
Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of
customers to recommend a company’s products or services to others. It is used as a proxy for
gauging the customer’s overall satisfaction with a company’s product or service and the customer’s
loyalty to the brand. On the other hand, CSAT mostly uses a scale of 1 to 5 to measure customer
satisfaction. It is often asked by a customer after a transaction or customer support ticket to
evaluate the efficiency of the customer service department.
CSAT scale can be used to measure the following aspects of the model:

Aspects In store Online

Empathy How helpful is our in-store staff? How helpful is our beauty assistant
chat support?

Relationship How likely are you to buy from us again? Did you find our website secure
enough while your purchase? Please
leave comments.

Technology Was it easy for you to get your product Are you able to navigate through our
billed? Did it save your time? Please rate online portals (apps, social media, and
your level of satisfaction. website) effectively? Is it a smooth
experience?

Environment Rate the overall ambience of the store. Do you find the website appealing ?
Please rate your response.

Convenience Did you find what you were looking for? Did the categorization of the products
make it easy for you to find your
product?

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Finally, NPS can be used to measure the overall customer satisfaction:

How likely are you to recommend Nykaa to a friend or colleague?

Respondents give a rating between 0 (not at all likely) and 10 (extremely likely) and, depending
on their response, customers fall into one of 3 categories to establish an NPS score:

● Promoters: respond with a score of 9 or 10 and are typically loyal and enthusiastic
customers.
● Passives: respond with a score of 7 or 8. They are satisfied with your service but not happy
enough to be considered promoters.
● Detractors: respond with a score of 0 to 6. These unhappy customers are unlikely to buy
from you again, and may even discourage others from buying from you.

The Net Promoter Score (NPS) is determined by subtracting the percentage of customers who are
detractors from the percentage who are promoters. For eg., if 10% of customers are the detractors
and 60% are the promoters, the NPS score will be 50.

III. 3. CONCLUSION

The paper discusses current definitions and understanding of the concept of Customer Experience
Management and proposes a conceptual model for Nykaa. A number of conclusions can be drawn
from the study. First, the concept of customer experience is evolving and is not only limited to
customer satisfaction in terms of products and services. Second, the proposed framework has
highlighted the factors that influence the purchase intention such as searching, budgeting, and
awareness and most importantly past experience with the brand. It further recognized a well-
connected Omni channel interface as the key determinant to a holistic customer experience. That
is inclusive of physical and social environment, brand image, inventory, skilled personnel, data
insights, aesthetics, ease-of-use and security. Finally, it suggested that the outcome of a positive
customer experience are customer satisfaction, customer loyalty, repurchase intentions and
ultimately customer equity resulting from the positive overall experience. This framework is

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conceptual at present and calls for further development and empirical testing in order to identify
the relationships between these outcome variables. In addition, a customer experience index has
been proposed inclusive of seven factors namely environment, accessibility, empathy,
convenience, trust and technology which could be measured with the help of CSAT and NPS
metrics. This framework could be used by managers and practitioners to conceptualize and
measure experiences.

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