Why Customer Experience and Retention is the Single Best Way to Increase Revenue

Small business is the engine of the American economy.

Fortunately, it’s growing – 69% of small business owners expected revenue growth in 2017. And it’s robust growth, too: 38% of them expected their businesses to grow by more than 5%.

So how did these owners plan to achieve that much growth?

As you can see below, they’ve got quite a few ideas. But improving existing customer experience and retention tops the list.

This is smart for a bunch of reasons. Let’s look at the most compelling ones:

1. Improving customer experience improves retention.

This is common sense, but it’s always smart to back up your assumptions. Research shows that when people have a good experience with a company, they’re more likely to come back.

Ends up, most businesses aim to improve customer experience specifically to improve retention.

Let’s get specific about the benefits of retention, too. You all know retaining customers increases profits. But by how much – and where’s the proof?

Here’s your proof: Increasing customer retention rates by just 5% increases profits by 25% to 95%.

If that can’t get us motivated to improve retention rates and customer experience, I don’t know what will.

Well… maybe this might:

2. Companies that deliver great customer experiences tend to have dramatically better stock performance and valuations.

If you’re running a Mom and Pop store, a graph of S&P 500 companies might seem a bit out of reach. But small businesses tend to think big. Owners are often focused on company value, either so they can sell their business later on, or so they can hand over the most valuable asset possible to the next generation.

So consider this chart about customer experience leaders carefully. The businesses that treat their customers exceptionally well tend to have a 43% higher valuation than regular companies.

And the businesses that don’t? They’re worth 33.9% less.

Seems like even if you take out all the good feelings generated, it just makes financial sense to be good – even generous – with how you treat your customers.

3. A great customer experience may be your best way to differentiate yourself.

In one Econsultancy survey, small business owners were asked, “Over the next five years, what is the primary way your organization will seek to differentiate itself from competitors?” They named “Customer service/Customer Experience” as the #1 way to get there.

4. Better customer experience = happier employees.

It’s not just customers that you’ll retain if you improve the customer experience. Your employees will stick around longer, too.

And you know how much time, money and hassle not having to hire new employees can save. In our WASP State of Small Business report, we found that small business owners say hiring new employees is their biggest challenge.

5. Customer reviews have a powerful effect on local businesses.

Online reviews are becoming more important every year. And as they’re directly related to your customers’ experience, just had to include them here.

This isn’t just a millennial thing, either. 97% of consumers check a business’s reviews.

Here’s a few more poignant stats on how powerful reviews have become:

• 49% of consumers need at least a four-star rating before they choose to use a business
• 85% of consumers trust online reviews as much as personal recommendations

If you aren’t checking the reviews for your business, you should be. And you should be responding to every single review that is left – even the negative ones.

Which sites to check? According to Brightlocal, “Yelp & Facebook are local consumers’ most trusted review sites, followed by Google & BBB.org”. So start there, but consider checking even more sites if you can find the time.

Here’s how your customers – and potential customers – are judging your business when they check reviews:

So how do you get more reviews? You can just ask – especially if you do it in person. 68% of the respondents in the BrightLocal survey said they had left reviews after being asked to do so.

6. Happy customers spend more.

It’s remarkable how much value consumers place on having a good experience.

Not only are happy customers willing to spend more ($100 more!), but most of them care as much about how you treat them as they care about what you’re selling.

So if you think about it, the customer’s experience is actually a core part of your products or services. People are buying the experience you give them as much as they’re buying your widgets.

That’s not the only study that shows how happy customers spend more, either.

Research discussed in the Harvard Business Review shows that when the customer experience is truly top-notch, customers are worth up to two and a half times more.

How to get it done

I think we’ve made enough of a case by now: Investing in customer experience delivers outsized returns.

But how? How do you start being great to your customers?

I’m willing to bet you already know of at least three ways you could make things better for your existing customers. They probably haven’t been shy about telling you what they want.

But it never hurts to ask, either. So talk to them, for starters. Have your staff ask people if they could have done anything better. Ask a lot. You’ll start to hear some themes.

You might also want to take a leap and give your employees more power. Especially if they’re in customer service or in a “customer-facing” role (i.e., they interact directly with customers).

Empower your customer service reps to solve customer problems on their own. One of the most marked differences between top-performing and under performing companies is how empowered their customer service reps were.

“Empowered” reps were able to access customer information fast, had authority to fix things on the spot, and where able to get answers without ever having to say “let me ask a manager”.

It might take a few months to get there, but that’s a vision even Mom and Pop stores can attain.

Back to you

Improving customer experience has a lot of positive benefits, including increasing retention, improving profitability and even reducing staff turnover.

So what is your company doing to improve customer experience? Have you seen business returns from any improvements you’ve made? Leave a comment and tell us about it.

Read More: The Best Customer Experience Examples.