Do you believe great customer experience comes at great cost? Of course, it costs money to personalize packaging, to go omnichannel or to guarantee 24-hours delivery. But there is a big ROI at stake. Sit tight and read on as we’re going to show you how your revenue will benefit from a superior customer experience.
Gain new customers: customer experience as a competitive advantage
The way companies compete has changed tremendously over the last century. Harvard Business Review distincts 5 competition phases over the last two centuries. The first age was that of efficiency, with the triumph of Taylorism. Scale was the second movement. The goal was to take advantage of economies of scale to reduce unit costs and cut prices for the consumer. Companies later competed on product quality. The last 2 phases bring us closer to the current understanding of customer experience: interoperability and variety of choice became ways to produce an advantaged value proposition.
Is customer experience the new competitive battlefield?
What we see here is that competition was first centered on costs and price parameters, before taking a turn towards quality. Customer experience (also known as CX) is the logical next step in the way companies compete. It makes great sense when you think about it: at equal price tags, a customer will choose the company offering a better experience from beginning to end.
Focus on customer experience to compete on an additional dimension
According to the latest PwC Future of CX Survey, 73% of consumers indicate customer experience as an important factor in their buying decisions. Yet only 49% of U.S. consumers say companies provide a good customer experience today.
This means that from the moment you start monitoring and improving your clients’ experience, your company will compete on an additional dimension for customer value. CX is a source of competitive advantage, and as such, it can boost your company’s revenue.
Retain your customers: customer experience is a loyalty tool
Not only is customer experience an advantage to gain customers, it is also a great customer retention tool.
Only a few years ago, companies’ business models heavily relied on switching costs to lock customers in their ecosystem and earn more from them. Switching costs are “the costs that a consumer incurs as a result of changing brands, suppliers, or products” (see the complete definition here). They can be financial of course but are also often time-related (hassle-factor) and psychological (relationship costs).
A typical example of a company using switching costs to retain customers is Nespresso. Nespresso lures you in with an attractively priced coffee machine, and you are then forced to buy Nespresso’s coffee capsules. The same thing happens with Amazon’s Kindle and Hewlett Packard’s printers‘ cartridges. (You’ll find more examples of switching traps in this article).
But switching costs alone no longer pull off the trick for retaining customers today. Given the saturation of markets in developed country and the consumers’ longing for transparency and open access, customer experience becomes a prime loyalty tool.
- If you combine high switching costs with memorable customer experience, your customers are virtually untouchable. They have absolutely no reason to switch.
- On the contrary, customers with low switching costs and poor customer experience constitute low hanging fruits for your competitors.
- Your customers’ assessment of switching costs is not fixed, so don’t neglect your clients’ experience simply because of high switching costs. Research demonstrates that alternatives and competition have the strongest influence on switching costs. Competition actively reduces these costs via affecting buyer’s quality perception of your products and offerings. This is why you need superior experience to encourage retention.
Increase spend: the price premium for getting customer experience right
The legends are true: people are willing to pay more for a better customer experience. The price premium is real, and it’s quite big!
According to the latest PwC Future of Customer Experience Survey, 43% of all consumers would pay more for greater convenience; 42% would pay more for a friendly, welcoming experience. The payoffs for valuable, great experiences are substantial: up to a 16% price premium on products and services.
In return, among U.S. consumers, there’s a sharp increase in willingness to give up personal data. 63% say they’d share more information with a company that offers a great experience.
Poor customer experience also has a cost!
Finally, do remember that failing to offer good customer experience is also costly. Bad experience is actively driving clients away. And the worst is, it’s driving them away fast! 32% of consumers say they will abandon a brand they love after just one bad experience (PWC worldwide CX survey, 2017-2018).
Enhancing your CX is a great way to gain new customers, retain the ones you have long-term, and increase their spend. As companies are moving fast to ensure outstanding customer experience, you have to keep up with increasing standards.
Ready to transform your customer experience?