In the past, our customer care experience consisted of calling up a bank, phone, credit card, or insurance company to dispute an issue. It was often a poor experience with complicated IVR systems and long wait times. Many of these companies did not prioritize customer care and often offshored it overseas to save money. The rise of new, direct-to-consumer brands and digital marketplaces is challenging these legacy businesses, and a positive customer experience is increasingly becoming a strategic imperative for retaining and upselling customers. Today's customers want instant gratification and resolution. Dissatisfied customers often use social media and strong word of mouth to express their opinions.

Entrepreneurs are seizing on the need for a modern customer experience and are re-imagining what customer service tools and user experiences should look like.

Why Now?

Omnichannel commerce is now standard, and with it comes an added complexity to the customer journey. The average enterprise has increased the number of channels they offer by nearly 50% since 2014[1]. While voice is still the dominant contact method, digital interactions have, on the whole, surpassed voice by volume. Customer expectations have increased as well: 89% of consumers want a way to message a company, and a majority expect a response within 60 seconds[2].

Enterprises have historically outsourced customer service, primarily due to its highly repetitive processes, which provide the ideal proving ground for software and artificial intelligence. While AI cannot handle the full conversation and resolution of customer issues, it can triage, analyze, and answer most routine queries. AI-powered customer experience solutions free up an agent's time to address more complex requests and focus on higher level customer engagement. In an increasingly complex environment, companies are turning to software to help manage the increase in tickets, channels, and requests.

The Software Landscape

Customer service software is often well entrenched in a company's workflow. These changing customer paradigms, however, are driving an opportunity for new entrants to displace legacy providers for both core and value-added offerings.

• Helpdesk/CRM – This is the central nervous system of customer service teams. The CRM acts as the source-of-truth for customer interactions, and all data flows into and out of this system.
• Channels – Consists of voice, chat, email, social media, SMS, and more. These channels can be part of the core help desk or can be a separate solution that feeds into and out of the CRM.
• Enhancement - Agent coaching, text and voice analysis, proactive customer service, and more. Innovative companies are building solutions that sit on or in between customer interactions. Easy integration is critical.

Market disruption

The size of the Customer Experience market globally is approximately $100B[3], consisting of categories such as outsourcing, customer support software, call center software, and experience management, among others. Much of this spending is on legacy products and services, where growth has been close to flat as companies prioritize cloud offerings. Many of these solutions have long deployment times and significant customization needs, creating vendor lock-in.

Since 2019, venture investors have invested over $2B in nearly 200 companies in this category, an over 24% two-year CAGR[4]. The investment reflects entrepreneur views that cloud-native software built on a modern software stack delivers superior capabilities to customers in an omnichannel and real-time era.

Areas we are excited about:

1. Vertical workflow tools. One size does not fit all. While the building blocks may seem similar, industry-specific workflows and modules are essential to driving adoption in targeted verticals.
   
   Example: Weave has built substantial scale by creating a vertical solution that addresses the need for dental and optometry offices. We expect similar solutions to emerge in many SMB categories.
2. Agent augmentation: Call centers and help desks can leverage the wealth of data in their systems to augment the agent experience. This can range from real-time voice coaching to tier-1 ticket triage or agent performance optimization. Improving the agent experience equates to an improved customer experience.
   
   Example: Cogito and ObserveAI record every customer interaction, using the emotion and content of these communications to help improve the performance of customer care agents.
3. Voice of the customer: Companies should not only hear from customers when they have complaints. Software solutions can help collect and analyze continuous feedback for customer insights and proactive support.
   
   Example: Podium allows small businesses to stay close to the customer through review requests and messaging.

At NGP Capital, we believe that the significant volume of customer experience work that was historically outsourced will come back to enterprises. These businesses will use modern software to satisfy their demanding customers, while driving their costs down through automation.

We are eager to partner with entrepreneurs building the next generation of Customer Experience companies. Please feel free to reach out if this sounds like you

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[1] Gartner Effortless Experience Survey (2019)

[2] Twilio Global Messaging Consumer Report (2016)

[3] IDC Worldwide Semiannual IT Spending Guide Customer Relationship Management (CRM): Vertical and Company Size (July 2016), GMI Outsourced Customer Care Services Market Size By Service (May 2017)

[4] Pitchbook

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