Everybody’s talking about how to improve the customer experience (or CX) these days, but if better customer experience doesn’t translate into dollar signs for your revenue growth, then is the effort even worth it? Maybe focusing on customer experience is just a feel-good idea.
For quality answers to these concerns, we’ll defer to data from Qualtrics XM Institute’s study, ROI of Customer Experience, 2018. They analyzed feedback from 10,000 U.S. customers and used CX scores from the 2018 Temkin Experience Ratings, which analyzed 318 companies across 20 industries.
They used this data to estimate how a modest improvement in customer experience would impact the revenue of a typical $1 billion company across 20 industries.
Their top finding puts a dollar value on customer experience:
"On average, companies can gain $775 million over three years. Software companies stand to earn the most ($1 billion over three years), while utilities stand to earn the least ($476 million over three years)."
So is customer experience worth the expense? This data suggests a resounding “yes,” that even a modest improvement in customer experience could change things big time for companies. Software companies are the biggest winners, and even utility companies, coming in at the bottom of the list, still stand to gain.
Let’s delve into these numbers and examine four big ideas for how excellent customer experience can produce revenue growth for companies.
Why Customer Experience Should Matter to Your Company
Improving your customer experience means revenue growth: Growth that’s gained from higher repurchasing intent, increased revenue retention, more recommendations from current customers, and selling more new products.
But before we jump in, you might notice a common theme in these stats: Customer experience often comes down to how customers feel about their experience and how you treat them.
But more on that later….
1. Repurchasing Power
The correlation between customer experience and repurchasing is very high. Qualtrics reports:
“87% of consumers who gave a company a ‘very good’ CX rating report being ‘very likely’ to repurchase from that company, while only 18% of those who gave a company a ‘very poor’ CX rating say the same.”
That’s almost a 70 percent difference between the two ends of the spectrum. Which end would you like your company to be on? This data helps prove the idea we all sense is true: If customers enjoy working with your company, they’ll purchase from your company again, but if they really don’t like working with you...not gonna happen.
2. Revenue Retention
Qualtrics’ analysis shows that the opportunity to increase revenue retention is greatest in software.
“Software companies stand to retain the most business from existing customers ($347 million), whereas TV service providers stand to retain the least business ($131 million).”
Why? Simply put, if your customers are happy with you, they’ll stick around. They’ll be less likely to cancel their contracts, and more likely to sign with you for another year or longer contract period—whatever customer retention looks like at your company.
And as we know, customer retention is highly valuable to companies. It's more profitable to retain than to acquire customers, and happy customers can also bring in new business.
3. Customer Advocacy
Speaking of customer referrals, want more customers to recommend your company? It all comes back to your customer experience, of course. But how much does customer experience affect the number of advocates you have?
According to Qualtrics’ data, there’s a 21-point difference in Net Promoter Scores between those who say customer experience is very good and those who say it’s very poor.
In other words:
“88% of consumers who rate a company’s CX as ‘very good’ are likely to recommend the company, compared with only 15% of those who rate a company’s CX as ‘very poor.’”
Again, there’s a huge difference between the happiest and unhappiest customers. It’s logical. Happy customers want to tell colleagues, friends, and family to work with you because you’re making their life so much easier and giving them results to write home about. And that’s going to translate into revenue.
4. Higher Sales for New Products
With a happy, excited customer base, companies see more sales of new offerings. Software companies, again, are on the high end:
“Software firms can sell the most new products. When it comes to additional purchases of new offerings, software makers can add $185 million, while health plans, utilities, and parcel delivery services can add $35 million.”
Plus, your customers are more likely to try the new product/service as soon as you release it.
“Of the consumers who gave a company a “very good” CX rating, 58% of them report being “very likely” to try that company’s new product or service immediately after it’s introduced. Meanwhile, only 13% of consumers who gave a company a “very poor” CX rating feel the same.”
Wouldn’t it be great to have 58 percent of your customers immediately inquire about expanding their account when you announce a new product? That’s a huge boost for upsell revenue.
These revenue numbers should be a huge incentive to reorient your company’s focus toward improving and modernizing the customer experience.
But once you’ve made the decision to focus on customer experience, how do you actually improve it?
Reduce Customer Effort + Improve Customer Experience With Online Community
Like we talked about above, emotion plays a huge role in customer experience. The three components of customer experience are success, effort, and emotion. Qualtrics reports that of the three, “an improvement in emotion drives the most significant increase in loyalty.” But we’d argue that an improvement in effort and success is the first step toward improving emotion.
So what can you do to promote a more positive, meaningful experience for customers that will be reflected in your revenue?
If this seems like a complex problem, The Community Roundtable’s report on The State of Community Management has some encouragement:
“Community approaches scale trust, remove bottlenecks, and empower individuals to act on new information quickly and transparently, while enabling others to learn and maintain a shared situational awareness as things change. This incremental yet rapidly iterative approach to change is the best way to transform an organization without destructive and abrupt upheaval.”
Online communities are the next wave of customer engagement, because they unlock the key to this elusive idea of organizational change, and unleash the revenue growth that comes with improving your customer experience.
For your first step toward making a change in customer experience, check out our free resource kit below. We want to help customer success leaders and executives reorient and act on their intentions to improve the customer experience.
What's a good first step for companies who want to improve their customer experience? Share your thoughts below.