How does customer experience pay? Check out your portfolio

You would think that the return on customer experience is obvious.  A better customer experience improves loyalty, and loyalty means you can spend more time serving customers than chasing new ones, resulting in cost savings.

What Do The Numbers Say?

There are a number of studies that support this contention, including:

• Medalia reports that customers who report a great customer experience spend 140% more than those who report the worst experiences, and that a subscription-based customer are 72% more likely to remain a customer a year later.
• The Temkin Group analysis shows that a modest increase in customer experience can result in significant revenue increases – a $1 billion bank sees $273 million in additional revenue over three years, and even a health plan sees $140.8 million in new revenue.
• Net Promoter Score inventor Fred Reichheld writes in The Ultimate Question 2.0 that a 5 percent improvement in customer retention can yield between a 20 percent and 100 percent increase in profits across a wide range of industries.

But my favorite is the annual review by Watermark Consulting.  Earlier in the year I was bummed because it didn’t look like they were running an update. But I just ran across their newest report. What distinguishes Watermark’s results from others is that they tie customer experience directly to stock performance.

The report simulates a CX Believer, a CX Non-Believer, and compare the results with the S&P 500 in stock purchases from 2007 through 2013.  At the start of the year, the CX Believer buys the top 10 publicly-traded companies in Forrester’s annual customer experience index (coined CX Leaders). The CX Non-Believer buys the bottom 10 (called CX Laggards). All stocks are sold at the end of the year, purchasing the newest leaders and laggards.

I love this report – it really shows the bottom-line impact of customer experience. So, how did each portfolio perform over the past 7 years?

• The S&P gained 51.5% over the last seven years.  Not great, but we did have the Great Recession during that time.
• The CX Laggards lost 2.5% over 7 years.  Not such a good performance.
• The CX Leaders returned 77.7%, more than 50% better than the market average.

So, yes, Customer Experience pays. By building loyalty, companies with a great customer experience grow organically, through keeping customers and selling more to them.

If you’d like to learn more about Customer Experience, join the CXPA for Customer Experience Day, where we will have tons of great activities going on.  Check out www.CXPA.org for a full list, including a great event here in Minneapolis!

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By the way, Leslie Pagel at Walker just posted this great piece on ROCX – The Return on Customer Experience.  Check it out!