Why Manage the Customer Experience? Because it’s a Guaranteed Investment!
(CX) is effectively guaranteed to improve your bottom line.
89% of CEOs are looking to include customer experience as a strategic differentiator, but the reality is that only 8% (Gartner Group, 2016) of these organizations are achieving this according to their own customers. Why should you as an executive care about this? Because you’re smart enough to know that it’s not really about the customer.
CEOs care about the bottom line because boards of directors are structured to drive this behaviour. It’s not to say that the CEO and his leadership don’t care about the customer, but there is a more fundamental behavioral driver at play. In over 20 years of CEM consulting and management I’ve never seen an investment in CX that has not improved the bottom line, and the careers of those responsible for the initiatives. Further, there are a multitude of studies and proof points which affirm that...
Customer Experience makes a difference.
In addition to the often-mentioned gap between CEO expectation and the actual customer experience, the above chart based on work by Watermark Consulting, shows that over a 5-year period, the customer experience leaders total market return dwarfed that of the laggards. When a board or CEO embraces this reality, it drives the CEO to direct the company to improve their customer experience as a strategic imperative.
It’s important to first distinguish what we’re discussing. The concept itself is pretty simple. Customer Experience (CX) on its own is a perception of the customer’s feelings over time. This is not customer service nor is it digital experience. It's the entirety of the customers lasting perceptions. To improve this perception across all customers and all touchpoints, you need to focus on the discipline surrounding CX, Customer Experience Management (CEM). Following a strong CEM practice achieves this by ensuring that the company is continuously improving its customer experience.
If you haven’t heard of the Net Promoter Score (NPS®), then you should really read up on it. The Harvard Business Review calls it “The One Number You Need to Grow,” (Reichheld, 2003). In short, NPS® is the most commonly used metric for customer loyalty. NPS® bases its measurement on the likelihood that a customer would recommend a company’s product or service to a friend or colleague. So what? Isn’t that just another way of asking about customer satisfaction?
When someone recommends your company to someone else, they are more likely to establish a longtime commitment with your company; to be a loyal customer. This recommendation puts their own reputation on the line to promote your product or service.
You can start to see the line where profit growth and customer loyalty arguably go hand in hand. Consumers spend more with companies that provide a history of positive customer experiences (ebiquity, 2014) improving the repurchase dynamics. Another important outcome of loyalty economics is that consumers repeat stories about their bad experiences more often than their good experiences, with 95% of negative experiences leading to a customer telling someone they know about their bad experience with the company. Consequently, this means that poor or even just inconsistent customer experiences will lead to a disproportionate decline in your marketing effectiveness.
It’s not just increased share of wallet and referrals that drives the growth of your company. Greater loyalty drives growth through more positive repurchase and retention behaviors. The other key elements of loyalty economics are the lower costs to serve these more loyal customers, and the constructive feedback provided by loyal customers to help your company better meet their specific needs in the future.
The Strategic Impact
We’ve talked about the impressive operational benefits resulting from an effective CEM approach. More importantly, over several years, companies will see that a well-managed approach to Customer Experience across the company becomes a positive catalyst on your strategic and corporate development priorities.
Although so many companies are looking to improve their customer experience, it is still a relatively new concept. I always suggest that the first thing companies need to do is to develop a strategy, start small, and plan to grow. The strategy can come from a book, course or vendor, but I will always recommend that engaging an experienced guide will avoid mistakes and pay off with a much faster time to value improvement! The Customer Experience Professionals Association is a great place to find a guide.