A modern company may have the best professionals in the traditional areas that ensured success, yet still be completely overtaken by the market, which includes its consumers and competitors. For example, it may have the best financial management, the most capable salespeople, the most daring marketing managers, or have established teams dedicated to operational management, logistics, or cybersecurity, to name a few areas of high specialization. But all of the above will be of little use if you have not invested enough in Customer Experience in the quest for the sacrosanct grail of ROI: return on investment, which so often determines whether a firm survives or not.
A recent study by the XM Institute, part of the consulting firm Qualtrics (which recently acquired the renowned Temkin Group), highlights the very strong relationship between customer experience (CX) and return on investment. To the extent that a principle applies almost systematically to all the cases studied: if the experience is poor, the customer disappears. There are no half measures when it comes to fine-tuning this discipline: either we are willing to study it, get involved in it, and apply it at all times, or we will be slower and more clumsy than the demands imposed by the market.
The study is based on data obtained from surveys of an extensive database: 10,000 consumers from almost 300 companies belonging to 20 industries. What is surprising is that despite the enormous disparity that could be found in such a heterogeneous field of study, the conclusions regarding CX and ROI are consistent and trace an unmistakable pattern. In this sense, the correlation between experience management and a variable as valued and feared as loyalty can be described as a "mathematical progression." The study's scatter plot generates a Pearson coefficient, which measures the statistical correlation between two continuous variables, of a not inconsiderable 0.87 out of a possible maximum of 1 (pure linear progression).
Breaking down the math into tangible data, it can be said that negative or very negative experiences, between 10% and 20% below the industry average, generate customer losses of between 30% and 40%; in turn, positive or very positive experiences, above 10% of the industry average, lead to customer loyalty that can reach 20%. And halfway between the two, experiences that are neither particularly disappointing nor stimulating tend to penalize companies more, with loyalty rates of between 0% and -5%.
There is also a very close correlation (Pearson coefficient of 0.82) between Customer Experience and what is known asthe Net Promoter Score ( NPS), perhaps the most established key performance indicator (KPI) in this discipline. This high correlation confirms that the NPS is indeed an excellent standard for measuring CX today.
When asked about possible behaviors as customers based on their experiences, respondents answered with percentages that were also symptomatically similar for each of these possible behaviors: a very small number would exhibit this behavior if they gave the company a low score, while the number of customers who would exhibit this behavior if the score was average or high would be approximately double or triple that of the former, respectively. Put in figures, to see it more clearly:
- Behavior: buy more. Percentage according to score: 23% (low), 59% (medium), 84% (high).
- Behavior: recommend the company. Percentage according to score: 22% (low), 59% (medium), 84% (high). (Virtually the same as the previous point).
- Behavior: believing in the company. Percentage according to score: 22% (low), 51% (medium), 77% (high).
- Behavior: forgetting a bad experience. Percentage according to score: 19% (low), 39% (medium), 61% (high).
- Behavior: interested in a new offer. Percentage according to score: 17% (low), 37% (medium), 51% (high).
More specifically, these data refer to the measurement of "success" in Customer Experience, but they are practically identical in two other areas measured by the XM Institute: those related to the "efforts" of the companies monitored, and those linked to the "emotional" factors of that experience.
As we say, there are few variations if we observe how, unequivocally, experience and return go hand in hand. Where more variations are observed is in segmentation by industry. Thus, it is possible to identify the sectors that are most "punished" by a poor or insufficient experience. Fast food, credit cards, and retail trade top this particular "podium," with 67%, 60%, and 59% of consumers, respectively, reporting that they spend less or have completely eliminated spending with companies with which they have had a bad experience. If we focus only on customers who have stopped spending, the top three spots are occupied by credit cards (34%), computer and tablet manufacturers (30%), and car rental companies (28%).
The least affected sectors are utilities and a sector that we have addressed on numerous occasions at the BRAINTRUST Competition Observatory: health insurance. In the latter, the impact of customer experience is minimal compared to the rest: only 13% of consumers say they invest less if their experience is negative, and the number of customers who say they have completely eliminated any spending after a bad experience is reduced to 1 in 20.
In any case, this valuable study once again holds up a mirror to success in the current climate: in addition tomust-haves such as digital transformation, customer experience is asine qua non condition for the ever-revered ROI to come to the rescue of our companies. It is a matter of survival, because the market makes it clear: if you want a return, give me experience.
Photo byFrank BuschonUnsplash
