Here's How a Customer Experience Strategy Accelerates Customer Affinity and Company Revenues
Highlights
- Customer Experience strategy identifies the benefits and calculates the ROI of delivering superior Customer Experiences. It defines the path to achieve slated customer interactions and targeted revenue results in the shortest time and least cost. It also focuses on the methods and processes that produce the outcomes that most matter and avoids wasting time with activities that don't.
- Strategy identifies the specific experiences that most satisfy customers and can be scaled to maximize revenues. It targets the interactions that go beyond basic satisfaction and achieve more emotional goals that make consumers feel delighted, appreciated, valued, engaged or rewarded – and make those experiences memorable.
- Delivering superior customer experiences (CXs) sounds like a good idea. But good ideas are a dime a dozen. Any business growth strategy must demonstrate significant revenue growth to be adopted and continuous profitability to be sustained.
Too many companies and consultants launch CX programs with good intentions but without the data and strategy to achieve significant and sustained revenue growth.
That’s why a study reported on CustomerThink found that less than a third of CX initiatives are successful. And why analyst firm IDC reported that 87% of companies say they provide excellent CX, but only 11 percent of customers agree.
Part of the strategy is knowing whether the program even makes sense.
There is an important prerequisite to any revenue growth strategy. Before you answer HOW you need to first answer WHY. There is no sense in determining how to implement a customer experience program before you have determined that it will deliver significant and sustained revenue growth.
Customer strategies are only sustainable if they produce recurring revenue and profit growth. So, before you kick off a CX program, are you sure the investment and continued cost of execution will increase customer purchases, grow customer profitability and increase company revenues and profits? The only way to be sure is to measure the investment and the return.
The Financial Upside
We included questions in the Growth Strategy research survey to quantify the investment and payback of CX programs.
Somewhat surprisingly we first discovered that only 38 percent of those participants that adopted a Customer Experience strategy measured both the investment and the payback of the program.
Less surprisingly, of the 38 percent cohort, the Best-in-Class (top 15 percent) archetypes were 3.5 times more likely to perform these measures than their lower performing peers.
CX investments and revenue growth varied by industry and company size but were consistent in showing impressive gains. The below chart illustrates investment and revenue growth by company size across all sectors.
See the research that shows the cost and revenue impact of delivering rewarding customer experiences.
Click to TweetThe research supports that rewarding CXs create customer affinity, which is a leading indicator to increased customer purchases, price premiums, referrals, customer lifetime value and retention; all factors that deliver significant and sustained revenue growth.
The Cost of Inaction
For companies incurring more empowered customers, accelerated product commoditization, price pressure, changing market conditions or new competitors, a new or altered revenue strategy is likely needed.
Despite the need for action, inaction is the easiest choice. However, the status quo is incurring accelerated consequences.
The seismic rise of social media and savvy customers now rewards those brands that engage customers in social channels and deliver rewarding CXs. But on the flip side, brands who fail to meet customer expectations are being called out publicly in review sites, online forums and social networks that reach thousands or millions of potential and existing customers and maintain near permanency.
If a brand's products or interactions are chastised by existing customers, new prospects will steer elsewhere and existing customers will take note, thereby increasing the likelihood of churn.
A threefold challenge has surfaced whereby customers' expectations are growing, barriers to switching vendors are declining and innovative competitors are stepping up to convert customers from brands who fail to deliver on their customers’ expectations.
Our industry research shows that as consumers gain more power, they are less forgiving of bad experiences and switching brands at an accelerated pace.
21 percent of consumers will now abandon a brand based on a single bad experience.
A customer experience business growth strategy is best suited to highly competitive consumer industries where customers perceive multiple substitutable alternatives and where repeat purchases are essential to achieve company revenue objectives.
A Better Way to Develop a Strategy
If you are ready to disrupt business as usual and deliver differentiated experiences that increase customer affinity and company revenues, it's time to design the strategy.
The strategy defines a calculated approach to most efficiently deliver the experiences that maximize revenue and profit growth.
A customer experience strategy should answer three questions:
- What experiences matter to customers and are profitable for the company? The answer to this question should include a list of customer experiences ranked by payback. The answer will also show which experiences are not worth investment and should be avoided. Part of defining the most direct route to success is identifying what actions employees should stop doing.
- What CXs create differentiation and contribute to the company's brand, competitive advantages and unique value proposition? This answer will reveal those experiences that are the most sustainable.
- How will the company prioritize, execute and scale the right experiences to achieve significant revenue growth? And at the same time lower operating costs. The answer to this question provides the bridge from strategy to execution.
Customer experience strategies capitalize on core competencies, design competitive advantages that create or extend differentiation, demonstrate how the company will grow customer revenues, position the brand relative to competitors and make the investment needed to achieve the revenue goal.
We know from our research that customers value many different experiences, but for simplified management all the experiences can be allocated into the five segments of company (brand), products, transactions, engagement and customer support.
Designing the successful execution of profitable experiences in these categories creates visibility and predictability to the metrics that drive company revenues. The dashboard below shows how metrics impact each other and roll up to achieve the company's financial goal.
Dashboards like the above use a combination of company data where it’s available and industry benchmarks when it's not. Its initial purpose is to determine whether a CX program makes sense. After that it becomes an interactive model to perform What-If analysis and prioritize efforts, so they produce the maximum financial impact at the least cost.