How the Customer Experience Affects Your Bottom Line
It's vital for every business owner, leader and entrepreneur to understand the intricacies of how customer perception and experience can impact a business's success or failure.
Without a solid base of happy customers, even the greatest of business ideas is simply that: an idea. The most successful companies are those who initially win over customers, then continue evolving and adapting to the expectations of those customers. You can have the greatest idea for a business or the most amazing new product or service, but without a solid understanding of the importance of the customer experience (CX), your business's bottom line will be at the mercy of a customer base that becomes disassociated with your brand.
A customers' perception and experience have more power now over a business's success or failure than at any other point in history. Technology allows influential information to reach consumers in an instant, making online reviews, social media websites and word-of-mouth referrals crucial factors for every business to consider. When a business can surpass a customer's expectations, this positive CX can create a larger base of loyal customers who come to you with consistent future sales. Likewise, a negative CX can be the difference that breaks a business's sales goals or reputation for months, if not years. This is why every business owner, leader and entrepreneur should understand the intricacies of how CX affects their bottom line.
Improving CX is crucial to building loyal customers
When we think of how to deliver the highest quality CX possible, many business leaders believe this means delivering innovative ways to do so. However, according to a 2019 report from Gartner, the majority of CX leaders focus on trying to fix existing challenges with their company's CX rather than creating new projects or methods. But by attempting to remedy issues within a customer's interaction experience — rather than their experience with a specific product or service — those leaders are unable to help customers reaffirm their purchase decisions, leading to an overall drop in CX quality as well as customer loyalty. This tells us that getting feedback from customers is vital to your company's bottom line.
Furthermore, Gartner's report states that offering a salient CX is the largest driving factor behind fostering brand loyalty, "outperforming brand and price combined" by more than two-thirds. As Gartner's report states, the greatest impact on customer loyalty is rooted in a customer's product experience, accounting for some 36% of the total change in customer loyalty. In comparison, interaction experience only accounted for just over 30% of the change in customer loyalty behavior, 20% for brand perception and 13% for price.
For businesses looking to boost their bottom line through improving CX, this means that focusing on improving product experience for the customer is key to winning repeat sales. These repeat customers are the lifeline of your business; they are the ones who are not only easier to upsell, but their heightened loyalty to your business is a crucial generator of word-of-mouth referrals to bolster your customer network.
Increasing value for customers increases revenue
To give each one of your customers a winning CX with your business and its products or services, you first need to understand your customers' demographics. By better understanding who your customers are, their pain points and how to solve them, your business will be better positioned to provide exactly what they need. In this regard, your business will need to understand your customers better than they do themselves.
To better understand your customers, your business will need to coordinate all of its departments to align in ways that lead to increased customer satisfaction. Some of these ways include:
Listening to your customers and paying attention to their wants and needs
Asking questions about their experiences with your products or similar products from your competitors: What did they like or dislike about it? How do they think it could best be improved?
Uncover where your customers spend their time online — is there a specific social media platform they prefer to use that you can reach them on? Are there any specific online groups they're a part of that relate to your business or its offerings?
If your business can focus on improving its CX in these ways or others like them, it can lead to an increase in revenue without having to focus on other revenue streams such as finding additional leads. When customers feel valued by the brands they purchase from, they are more likely to increase their average order value, cross-sales, up-sales, and external referrals — all of which are key factors to improving lifetime customer value, customer loyalty, the overall CX and revenue.
Investing in comprehensive customer service brings returns
Think of a time when you bought a product or service from a company, only to feel dissatisfied with your purchase. Chances are, you felt hesitant to purchase the same good from that company in the future, unless you left feedback about your unsatisfactory experience and received some sort of customer service that attempted to remedy the situation. Perhaps it was a bad Uber or Lyft ride and the company gave you a $5 credit towards your next ride. Maybe you bought a drink at Starbucks that was made incorrectly, and the barista offered to remake your drink for free along with an apology.
In either case, that company's prompt response and attempt to fix the situation likely left you with a positive feeling about the brand. The overall experience can make you feel safe about future purchases and can lead to your continued business with them. This is the ROI generated for businesses that invest in comprehensive customer service solutions.
It's not a new idea, either. Even 15 years ago, McKinsey found that more than two-thirds of all buying experiences are based upon how customers feel they are treated by a specific business. When looking at how to improve your business's CX, understand how the emotions of your customers influence their buying decisions and behavior. If your business can create a comprehensive strategy to improve customer service, it can more easily turn a customer's negative emotions and perceptions of your business into positive ones.
To add to this, research conducted by the Tempkin Group found that 86% of customers are willing to pay higher prices in return for better customer service, and nearly half of all customers are more likely to make future impulsive purchases after receiving a personalized service experience with a company. When your business can provide a more personalized and comprehensive service to its customers, it creates a snowball effect that leads to increased feelings of loyalty from them, additional sales in larger sales volumes and a healthier bottom line.
Entrepreneur Editors' Picks
This Co-Founder Was Kicked Out of Retailers for Pitching a 'Taboo' Beauty Product. Now, Her Multi-Million-Dollar Company Sells It for More Than $20 an Ounce.
Have You Ever Obsessed Over 'What If'? According to Scientists, You Don't Actually Know What Would Have Fixed Everything.
After He Was Fired From the UFC, This Former Fighter Turned His Passion Into a Thriving Business
Most People Don't Know These 2 Things Are Resume Red Flags. A Career Expert Reveals How to Work Around Them.