Why You Can’t Ignore the Customer Experience

Why You Can’t Ignore the Customer Experience image Handshake1 300x138You work to make your company profitable—creating a strategic blend of market research, managing inventory and cash flow, improving productivity, strategic pricing, trimming costs and enlarging your customer base. However a key component of profitability, often missing from this list, is a stellar customer experience.

“Too expensive,” or “not quantitative enough” are common responses. But statistics tell a different story. And while price and product matter, service can matter even more. Here’s why:

  1. 70% of buying experiences are based on how the customer feels they are being treated1.
  2. Price is not the primary reason why consumers move their business to a competitor. It is far more likely to be a poor customer service experience2.
  3. Even in a negative economy, 60% say they are often or always willing to pay more for a better customer experience3.

Investment in Profitability

Customer service—even technical support—can no longer be considered simply a cost center like maintenance and payroll, to be tightly managed and trimmed wherever possible. Tony Hsieh, CEO of the highly successful and ultra customer service-centric company, Zappos, suggests that companies should look at their customer service team as a form of marketing investment; that each customer contact is an opportunity to retain a customer, create positive word of mouth, and build the brand. “Those who don’t believe this,” says Bob Paquin, former COO of Blue Nile, “are dealing in a false economy.”

In the long run, whether you’re a small business owner or Fortune 500, much of your success is dependent on loyal customers. According to the White House Office of Consumer Affairs, it costs over six times more to get a new customer than it does to keep a current one. Loosely translated, a bird in the hand is worth six in the bush.

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The Good and the Bad

So what happens when your customers have a negative service experience? The results seem clear:

  1. A customer is four times more likely to do business with a competitor if the problem is service-related, as opposed to price- or product-related4.
  2. 78% of consumers have ended a transaction due to bad service5.
  3. 96% of those never complain; most will just disappear. You never know what happened or why they were unhappy6.
  4. Bad news about your business will likely spread to twice as many people as good news7.

On the other hand, satisfied customers are your biggest advocates and best source of referrals. They’re a walking advertisement that costs you nothing! Studies indicate that a 5% reduction in customer defection rate can increase profits anywhere from 5 to 95%4. For example:

  1. The probability of selling to an existing, satisfied customer is 60-70 percent, while selling to a new customer is 5-20 percent8 (the probability of selling to someone who has had a negative experience with your company is practically zero).
  2. Happy customers who get their issue resolved tell four to six people about their good experience5.
  3. Spending for repeat eCommerce customers is almost double that of new customers1.

VIP Customer Service

Three years ago my friend, Rhonda, ordered a pair or shoes from a well-known online company. Three days later a box arrived with two left shoes. How could that have happened! When she called in distress—she was leaving shortly on an overseas trip—the agent assured her there would be no cost for the return and she would be elevated to a VIP customer, meaning that all future purchases would arrive in one day at no additional charge. Good experience? You bet! The process was simple and her needs (the correct shoes quickly) were met. A wrong was righted. She felt valued by the company. Results? Rhonda continues to order from that company AND she tells people about her great experience. What did it cost the company? Nothing, really, compared to the value of a loyal customer.

The New Battleground?

To be in sync with what customers expect, a company needs to proactively listen, be open to feedback and be willing to make the requested changes. Here’s what a group of consumers had to say:

  1. It takes too long to reach a live agent (72%)3
  2. They were on hold for too long (69%)3
  3. Agents failed to answer their questions (50%)3
  4. The information they received was not accurate (44%)3
  5. They were overall dissatisfied with their phone experience (85%)9

In light of the fact that 92% of all call center interactions take place via phone9, these statistics are sobering.

Some predict that customer experience will be the next corporate battleground, meaning it will be where companies win or lose. I would venture to say it’s also the elephant in the room. While 73% of large company marketing managers surveyed by Forbes Magazine admitted that “repeat purchase behavior” was integral to successful customer engagement, change is slow in coming. Today, 55% of current marketing budgets is spent on new customer acquisition, whereas only 12% is spent on customer retention1.

Stellar Investment

Satisfied consumers become loyal customers and loyal customers buy more, more often and more expensive items than new customers. In fact, a 10% increase in customer retention levels can result in a 30% increase in the value of the company4.

Where else can you get that kind of return on investment?

1 McKinsey

2 Accenture Global Customer Satisfaction Report 2008

3 Harris Interactive, Customer Experience Impact Report

4 Bain & Company

5 White House Office of Consumer Affairs

6 1 Financial Training Services

7 Lee Resource

8 Marketing Metrics

9 Gartner

Discuss This Article

Comments: 1

  • chatmeter says:

    Reputation management is extremely important to businesses nowadays considering how easy it is to share a positive or negative experiences with thousands of people with just a click of a mouse. It’s crucial that businesses pay attention and listen to what people are saying about them. Businesses can’t make everyone happy, but what they can do is monitor and address the problem. Their customers need to know they’re being heard, but pick your battles wisely. Sometimes comments can be irrelevant or a personal attack rather than a genuine review. Don’t underestimate the power of quick real-time responses. Consumers are very impatient and the quicker a business responds, the quicker they can amends with a bad situation.

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