Why CX should be your Competitive Differentiator?

With the advent of globalization, where access to potential competitors is just a click away for customers, companies should be moving towards making the customer experience their next differentiator. Customers no longer make their choices based on the products or the services; instead, they value a brand basis the experience they provide.

84 % of customers feel that experiences are as important as the actual products and services. (Source: Salesforce)

However, companies make the mistakes of being very calculative, looking into optimizing overheads/costs and increasing revenue, thereby ignoring the impact on customer experience. 

What is Customer Experience(CX)?

Customer experience is the end-to-end interaction of the customer with the brand/company. This includes touchpoints starting from onboarding, discovery, sales and customer service. In some cases, this would include the return experience which however would come in the ambit of customer service. For example, for a grocery delivery platform it would start from onboarding the customer seamlessly with minimum friction, easing the discovery of the products for the customer, checkout, delivery of the products and in case of issues/queries customer service.

Creating a unique experience for the customer has a long list of benefits for any business. It has its impacts as follows:

Increase Customer Loyalty and retention:

Customer loyalty is the inclination of the customer towards a company/brand despite the availability of alternatives. Customer loyalty can be achieved by providing some quantitative benefits or by a qualitative benefit to the customer. A quantitative benefit for a customer would be something on the line of creating rewards points, loyalty points, discounts, offers, etc. On the other hand, a qualitative benefit would include customer experience.

It is important to note that any quantitative methods would help create significant customer loyalty in the short term, but are often not sustainable in the longer run. Competitors can easily acquire your customers by providing better qualitative rewards, such as giving better discounts, thus making it difficult to retain the customer.

A qualitative reward is something that is intrinsic to the company and is difficult to replicate. For example, in the case of the banking industry, the way the bank treats its customers becomes the primary reason for customer loyalty. It gives the customer an essence that the brand understands your needs and is there for you at all times.

73% of consumers say a good experience is key in influencing their brand loyalties.

Another classic example of creating a qualitative experience would be Amazon, who is known for returning price-differences. 

Companies should focus on creating a unique experience for their customers, thereby earning their loyalty. The focus should be towards providing a consistent customer experience as 'A single negative customer experience reduces customer loyalty by an average of 20 percent, and reduces the chances of repurchase by 91%.’

Increase Customer Acquisition

A positive customer experience for a customer often motivates the customer to talk about the brand organically. Though there are many forms of marketing such as advertising, social media, etc, referral marketing is known to be the best form of marketing because of its ROI and impact. Positive word-of-mouth creates a prejudice for the incoming customer that the brand is good and performs as per expectations, thereby improving propensity of the customer to buy.

71 % of people recommend a product or service because they received a “great experience”. (Source: Convince & Convert Consulting).

Also, with information available easily, people prefer to build confidence in the product by reading through the review by the existing customers or ask about their experience with a product. The customer tends to ‘Social proof’ their choice before making their decision to buy. They are likely to ask a friend, a colleague or read through review about the product. 50 percent of Americans would choose word-of-mouth if they were asked to pick only one source of information. (Source: Convince & Convert Consulting)

Improve Profit margin:

Companies who are calculative in nature often miss the impact of customer experience on profit margin. According to White House Office of Consumer Affairs, it costs 6–7 times more to acquire a new customer than it does to keep a current one. With reduced cost on retention strategies, companies can rope in the benefits of the customer experience. Another study by Bain shows that increasing customer retention rates by 5% increases profits anywhere from 25% to 95%. (Bain, 2014)

A loyal customer is highly likely to transact with the same company because of the customer experience they get. According to Marketing Metrics, the probability of selling to a new prospect is between 5–20%, while the probability of selling to an existing customer is between 60–70%. This means that there would be more recurring sales from the same set of customers, effectively translating to less cost incurred in motivating the customer to transact.

Brands such as Apple are able to charge a premium for their products by creating a unique customer experience. 66% of customers say they’ll pay more for a great experience (82% for businesses). (Source: Salesforce). Creating an extraordinary customer experience helps Apple to charge a premium and sell millions of an iPhone. 

Increase Customer Lifetime Value (CLV):

Customer lifetime Value helps a brand to gauge their customers in terms of the amount of revenue the customer would bring. Providing a great experience increases the propensity of the customer to interact and transact with the brand. According to Gartner, 94 percent of customers going through an effortless experience are likely to repurchase vs. only 4 percent of those who went through a high level of effort. (Gartner, 2018). This effectively means that a customer having a positive customer experience will bring in more business as compared to any other customer.

With more and more competitors in the market and almost zero switching costs, customers who experience a single bad experience are likely to reduce their spending on the platform, which effectively means a reduction in the customer lifetime value and an increase in retention cost. Research by PWC shows that 32 percent of customers stop doing business with a brand they love after only one bad experience. (Source: PwC). Another research states that 22 percent of the customers who had a bad experience cut their spendings with the company and 19 percent stopped their relationships with the company completely. (Temkin, 2017). 

Takeaway

Companies must focus on providing the customers a consistent and positive customer experience. Even if there has been a negative experience in the customer journey, companies should proactively take remedial steps to compensate for the experience by going the extra mile. Resolving a complaint in the customer’s favor means they will do business with you again 70 percent of the time (Lee Resources)

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