Increasing revenue with customer experience

Customer experience as a growth engine is one of the most important topic in business community. Customer experience being subjective in nature makes it more interesting and difficult to understand, since one person's "helpful" is another person's "pushy." Your "attentive," might be my "stalker". Although, some studies have been successful to some extent in proving that the customer experience can have great impact on revenue, customer retention and creating customer loyalty.

"Customers who had the best past experiences spend 140% more compared to those who had the poorest past experiences"
- Peter Kriss, Harvard Business Review

Business owners are taking a close look at the relationship between how consumers rate customer experience, their probability to buy more, switch to a competitor or recommend the company to a friend or colleague; and have accepted the fact that the better job you do at providing a great customer experience, the greater number of customers are going to buy from you and will stay loyal to you.

"What we found: not only is it possible to quantify the impact of customer experience - but the effects are huge." -
"The Value of Customer Experience, Quantified," Harvard Business Review

Research which relates customer experience to revenue

"We looked at two companies with different revenue models - one transactional, the other subscription-based - using two common elements that are relevant to all industries: customer feedback, and future spending by individual customers. To see the effect of experience on future spending, we looked at experience data from individual customers at a point in time, and then looked at those individual customers' spending behaviors over the subsequent year."

Transactional business model is based on frequency of customer return and how much they spend in each visit. Ecommerce website are good example they keep sending you notifications and want you to open their application to come back every day and buy (or at least Save to Wish list).

Subscription-based businesses include Software-as-a-Service, no matter what they're selling, the model is the same. It relies on retention, cross-sells and upsells.

After controlling other factor that may lead to repeated purchases the result of study was-

* Transaction-based: Customers with the best past experiences spend140% more than those with the poorest past experiences.

* Subscription-based: Customers with the best past experiences have a 74% chance of remaining a member for at least another year; customers with the worst experiences have a 43% chance of being a member one year later. In fact, those who gave the highest customer experience scores were likely to remain members for another six years.

Also,

The Forrester research analyzed pairs of companies in the same industry - one of them scoring high on the Forrester Customer Experience Index and one with a much lower score. Then they gathered the financial data for these companies.

Across all industries the results are stark. The companies that focus on improving their customer experience enjoyed a Compounded Average Growth Rate (CAGR) of 17%. The ones with less of a customer focus grew 3%. In retail there was a 26% difference and cable companies saw a 24% difference.

Although, Forrester admit that although there is a correlation between companies that are growing their revenue faster and investing in customer experience, they cannot really prove that it is the customer experience investment causing the high performance. However, Forrester analyst Harley Manning says: "Customers who have a better experience with a company say they're less likely to stop doing business with the company and more likely to recommend it. Both of those factors should drive increased growth in customers and, in turn, increased growth of customer revenue."

Considering this data, we can conclude that the old model of successfully running a business alone cannot give you wide economic moat. You simply cannot rely solely on this business plan to be successful in almost all scenarios. Since customer experience is also a contributing factor which drives revenue and is responsible for successful business, one cannot neglect it. The era which we live customer interactions take place across different platforms and at many more places in the customer journey and provide many opportunities to have a direct influence on revenue. The product and price alone are no longer only deciding factors. Establishing, researching and investing in a strong customer experience will not only drive up retention rate of current customers but will also increase referral business through satisfied customer experience solution in comparison to your competitors.

No matter what we are buying we always look for answers to some specific questions which are-

1. How trustworthy is a company?
2. How efficient is Support team?
3. How easy is to extract information about them?
4. What do their current customers think about them?

Having positive answer to these questions can make a huge difference in winning and retaining business also having business advantage over competitors. There are following ways that companies are using to create a customer experience strategy:

1. Create a clear customer experience vision
2. Understand who your customers are
3. Create an emotional connection with your customers
4. Capture customer feedback in real time
5. A quality framework should be used for development of your team
6. Act upon regular employee feedback
7. Measure the ROI from delivering great customer experience

How to drive revenue growth with customer experience
Four steps to growth and savings:
1. Get your teams together
2. Don't just solve problems; root them out
3. Understand when it pays to improve the experience and when it doesn't
4. Keep your metrics focused on what matters

Good customer experience can lead to client retention, enrichment, and other factors, which all have loyalty-driven revenue potential. While there are still some reasons leads to bad CX and which result in customer may terminate their services with the company.

Now the question is how to improve business revenue by improving CX?

According to a survey of Harvard Business Review shows there is a direct link between CX and annual revenue increase. Their survey polled customer about their experiences with both transactions based and subscription-based companies. For transaction-based companies, who had best experiences were shown up to 140% more than those who were shown to have a poor experience. For companies based on subscription services, it was shown that members who rated their experience at the lowest score possible only had 43% chance of still being a member of one year later. In contrast, those who scored their experiences at the highest ratings had a 74% chance of still being a member in a year.

In this case, it is clear that positive customer experience meant a greater likelihood of higher revenue and happier clients who could advocate your brand to other potential clients.

Three types of Customer Experience Improvement strategies to for growth revenue

Focused on Broad improvements in services

In this strategy, efforts to improve CX can be applied in broad terms as types of interactions, service speed that customer has with your organization. Any individual customer experience improvement should result in revenue, but broad improvements may have the most noticeable results, as they will impact the largest amount. This strategy can affect companies like internet service provider, retailers, and other services.

Focused improvement in worst customers experiences

Focus your time and energy on improving worst user experiences, which can likely distinguish through customer surveys, feedback, and records of complaints that your customer service team has received. By doing this you can prevent customers from dropping your services, which will result in the largest return on investment with your customer experience improvement efforts.

Focused on most positive or satisfied customers experiences

For improving the higher CX could result in most dramatic revenue increase, while improving the poorest experience will do less for your bottom line. So you should keep your customer experience improvement efforts on most positive customer experiences seen by your company, which can analyze through positive feedback received in surveys. By doing these, customers who have a positive experience with your business will be encouraged to return by time and time again as well become a loyal customer who can bring in additional customers which eventually results in growth in revenue. CX improvement efforts have been shown to actually reduce cost with improved growth in revenue.

With this I hope you would have got an overview of usability testing and all the peculiarities involved. I hope you enjoyed reading this article. Thanks for your time and feel free to add your comments below and let me know your thoughts about this article.

Author: Rick from UXuadit.io