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A few of us “marketing nerds” were recently engaged in a fascinating discussion on LinkedIn. It all started when one of our number was struggling to convince a client of the merits of investing in customer experience. Amazingly, the CEO in question rejected out of hand any initiative designed to improve his organisation’s customer experience, saying that he couldn’t see the ROI.
Collectively we were searching for studies that made the case for customer experience initiatives and there were hundreds of them – Chris Little of Beyond Curiosity wrote a paper about this. This fact itself raised a bigger issue – why have so many marketers been asking this question?
Surely it’s common sense that if a customer has a good experience they will buy from you again? Why waste time and money proving what is perfectly obvious, especially if so many people have already proven your point with their own research?
A few facts about customer experience
It seems our business leaders are hard to convince and reluctant to invest in things that will make customers feel better about their brand, but really, by now, they should be just getting on with it. So, to put things straight …
- All the evidence supports the belief that the impact of customer experience on future sales are huge.
- Customers that give a 10-point satisfaction score for a purchase experience are likely to increase their spending with you by a factor of 2.4, while customers giving a 1-point score will probably spend no more.
- The figures are equally impressive in respect of a subscription-based offer.
- It is entirely feasible to reduce customer care cost significantly. Sprint has recently done so by 33% through investment in the experience.
- Product is no longer the main area of competition. Service is now intrinsic to the customer experience and it’s where the advantage can be gained over competitors.
- A third of customers abandon a brand after one bad experience and it is far more difficult to win them back than it is to attract them in the first place. Estimates put the cost of regaining a customer at 100-times that of acquiring them.
- People will pay up to 20% extra for outstanding service, but it remains a matter of “value”. They won’t pay if a cheaper competitor offers the same standard at a lower price
- Positive CX experience reduces overall marketing costs.
Why do business leaders still question investment in customer experience?
So, our discussion moved on to the reasons why senior executives remain so reluctant to accept the facts. It almost seems they are looking for excuses NOT to invest.
It’s tough, I know, for senior executives who have grown up with the traditional business model to grasp the very different way that the digital marketplace works. For them the old model is instinctive and thinking like a digital native is, at best contrived. They have no choice but to leave this stuff to the 60%+ of the digital natives in their employ for whom it’s second nature.
This places a different emphasis on the role of senior executives. Their years of experience makes legacy managers invaluable in opening doors for younger executives and employees to make their contribution. Innovation is a critical component of success in the digital economy, but the generation of ideas isn’t going to come from the boardroom and the old top-down management model doesn’t work.
Understanding the true cost of a dissatisfied customer
Also, common among traditional leaders is a lack of awareness of their true cost of sale. It isn’t that the principle isn’t understood, but it seems significant costs, like those of returning and exchanging goods and customer support time, are commonly overlooked in organisations that don’t use digital processes to gather and analyse data.
Dissatisfied customers also cost a lot of money and the evidence clearly shows more mature customers, who currently account for 70% of purchasing power, to be the most demanding, so the effect is highly geared.
In fact there’s a general pattern of demands and low levels of sympathy with sellers increasing with the maturity of the customer. GenZ, – in keeping with their generally laid-back approach to life – complain more, although they react less severely to disappointment.
The value of advocacy
Another factor that has to be borne in mind when calculating the return on CX investment is the contribution advocacy makes to reducing the cost per sale.
Latest figures suggest that a customer with a good experience will recommend the product or service to around twenty friends. Recommendations by friends are highly valued among all generational groups.
Unbiased editorial is also engaging and cleverly created, authoritative content – as distinct from blogging – that avoids a sales pitch, will add strategic strength to a brand. However, there is growing distrust of social media, blogger and Influencer recommendations. These vehicles are not the way to go.
Customers that have an affinity with a brand are also more likely to try its new products and services. This both reduces the cost of launching a new product or range extension and speeds up its growth. The speed at which a new product gains market share is of paramount importance in the digital economy.
Three key insights to help you align your business to success
There’s no doubt that investment in customer experience generates a return and this can be significant if the strategy and components are well designed. Bad design and ill-conceived strategy is often the root cause of dissatisfaction among senior executives of CX return.
You need to focus the role of your senior management team on facilitation rather than command and control. This is a challenge for most businesses whose senior executives are usually a product of old-school business, but it will give you a better customer focus.
You have to engage your workforce. It’s the only way you’ll generate the levels of innovation required to succeed in the digital economy. However, for many businesses born of a traditional business model this requires first liberating employees from the oppression and habits evolved of a top-down culture.
My own experience is that not only do employees in a command and control environment settle into the role of implementers rather than initiators. Over time, this kind of business culture escalates to become hiring discrimination. The outcome is a workforce for whom generating ideas is counter-intuitive.
Why brand is the critical component
The reason brands become successful is that people embrace them. Customers, investors, suppliers, distributers, partners and employees all have a sense of belonging. This is based on a feeling of trust and knowing – the same emotional influence that enables you to choose your friends. Basically, a brand is a community of people who share values and beliefs.
The task facing brands is to make it as easy as possible for everyone to get to know them and that means keeping things honest, consistent and simple. This has to start with a process of defining your brand. I achieve this with a brand discovery programme that creates a brand model with twelve co-ordinates.
But it isn’t just about the brand model itself. The process of creating it is part of the development process. The way I tackle this with workshops and internal marketing encourages business leaders into a more facilitatory role and liberates employees.
Once leaders and employees settle into their new roles and they share the single-minded vision and objective defined within the brand model. Provided the process is defined and managed correctly, they will begin re-modelling the organisation.
With the help of a guided programme, they’ll listen more closely to customers and introduce innovation, processes and structures that add efficiency to the organisation – the major determinant of success or failure and what digital transformation is all about.
This enables the delivery of better, cheaper products and services in a simpler, faster way, meeting the needs of today’s consumers.
The combination of better product solutions and better delivery and support adds up to a better customer experience, then repeat business, recommendation, and greater success with new product introductions moving forward.
It doesn’t take a genius to recognise that this is the recipe for triumph in the digital economy, but there is no escaping the fact, it all starts with defining your brand.
If you want help or advice on creating your own brand model you can get in touch and I’ll happily help you where I can. Otherwise, you could enrol on my Brand Modelling course at thefulleffect.com/courses.
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