Pop quiz: How much more expensive is it to acquire a new customer than to keep an existing one?
If you said five times more expensive, then you’ve read a lot of the same articles I have. This has been a go-to statistic for so long, we’d be hard pressed to find someone in business who hasn’t heard this figure. And while it’s backed up by plenty of research, it’s also become vogue to question if it’s something even worth thinking about—just take a look at this Forbes article that basically shrugs at our question.
I’m here to officially un-shrug this topic. The fact of the matter is that customer experience management is an increasingly important part of any successful business strategy.
What is customer experience and why does it matter?
Customer experience is a broad term that encompasses every element of a customer’s emotional experience with your brand—their perception that they’re heard, seen, and valued—and it matters because it’s the best strategy a business has to build loyalty and enjoy everything that comes with it. It’s equal parts “heart and smart”—a winning customer experience management strategy addresses how different parts of an organization align to fulfill promises to their customers, and it also seeks to elevate the human experience of employees and customers alike.
Okay, that’s a lot of theoretical language. But what does it look like in practice? Let’s look at why customer experience matters by exploring three concrete benefits of good CX.
Benefit #1: Good customer experience management saves marketing dollars.
Let’s go back to that old maxim about a new customer costing five times more than an existing one. It’s important to keep in mind that this figure is most relevant to product-driven businesses and industries where pushy salespeople are struggling to meet their quotas. Think about a car dealership and how much money is spent advertising on opaque channels like billboards and television. And how much of the customer experience is built around sellers getting people in the door, then fighting tooth and nail to keep them there until they buy.
In this old way of selling (and thinking about customer experience), it’s a numbers game; spend a ton of money, give a lot of people a rather unpleasant experience, and hope you sell enough to pay for the whole engine.
When we step away from the car lot and into a B2B situation, it’s easy to see how loyal customers are simply easier—and therefore cheaper—to sell to. Consider the following: According to research from Invesp, the overall success rate of selling to a new customer is just 5-20%. That same rate for existing customers? A whopping 60-70%.
Yet the same research shows that only 18% of companies are more focused on retention than acquisition. That’s a real head scratcher.
Benefit #2: Good customer experience management builds trust.
When was the last time you saw an advertisement and actually believed it? All-in, blind faith, completely trusted that the product or service being pitched can actually do what it says, at the price it promises, and in a better way than the competition? If you can’t remember, you’re not alone; among Millennials alone, 84% of buyers simply don’t trust ads.
Buyers today expect to be able to do their own research and understand not just what a company can offer them, but how they do it. Case studies, customer testimonials, and reviews have a tremendous power to show customers what it feels like to do business with an organization—but a company can only hope to achieve a compelling base of this kind of evidence if they have satisfied customers willing to share their experiences.
But the trust factor isn’t limited to leveraging satisfied customers as a means of acquiring new ones. It also extends to shaping how existing customers react when something goes wrong. Research suggests that 95% of customers will gladly stick with a company as long as they feel like an issue is resolved effectively and quickly. That’s something that can only happen if customer-facing employees are empowered to address negative experiences and provide real solutions.
By the way, providing that kind of experience really does matter when you look at the numbers—to the tune of $136.8 billion dollars lost by companies each year due to avoidable customer churn.
Benefit #3: Good customer experience management increases revenue.
With that last figure in mind, let’s get down to brass tacks and talk about exactly how much money is at stake in the customer experience game. According to research from Dan McCarthy and Russell Winer, the top 20% of a company’s customers can generate between 105% and 113% of a company’s total profits.
That’s right—they can account for more than 100% of profits.
Why? Because less satisfied customers might not actually make a company money. Loss leaders and turn-and-burn customers can be expensive to land, but very easy to lose. That leaves the 20% of customers that are most satisfied to pick up the slack. What if your business invested in a customer experience management framework that aims even higher and keeps a greater percentage of customers happy and coming back for more?
Aim higher with Alignmint Growth Strategies.
If all of this data has you convinced of the importance of customer experience management, the next step is to do something about it. At Alignmint Growth Strategies, we use a four-part approach to help businesses in a variety of industries think critically about the experience they want for their customers and align to actually deliver that experience, nothing less.
It’s our job to help you learn more about what makes your customers tick, identify internal challenges to delivering a superior customer experience, and equip you with Playbooks that translate our findings into actionable steps for employees at every step of the business.
Ready to take that first step? Let’s talk.