Customer engagement is closely tied to winning and, more importantly, keeping customers. In all industries, but especially in service industries, customer experience is a major differentiator.
People choose to buy products and services for many reasons. Price is an obvious one, but it’s far from the only reason. In virtually every industry, consumers have an array of choices and different brands to consider. Selecting a complex product or professional service can take a lot of effort. Some consumers are inveterate shoppers – they’ll look around constantly for the best value or lowest price. Why would a customer who has a positive experience want to go to that trouble of researching and choosing another provider? The simple answer is, most don’t. Unfortunately, too many companies give their customers reasons to look around.Businesses that want to keep their customers need to focus on improving the customers’ experience.
Here are five benefits of creating a better experience for customers:
- Higher customer retention. It’s well known that the cost of keeping an existing customer is much lower than the expense of acquiring a new one. A customer has the power to decide which products and services to buy and from which provider. Did your company make a positive influence on that decision?
- Enhanced brand loyalty. When customers have a positive experience, they tend to feel more confident in the brand and are comfortable recommending it to others. An organization that can build and sustain customers loyal to its brand has a distinct competitive advantage.
- Reduced price sensitivity. Some consumers base their decision mainly on price, but many do not. There is ample evidence that strong brands can command a premium price. Maintaining a high level of customer engagement is one way to keep customers comfortable with premium pricing or during periods of price increases.
- More referrals. Loyal customers are a great source of referral business, and they can become terrific ambassadors for your brand. Customers who tolerate less than satisfying experiences might continue to buy your products or services, but they are unlikely to recommend them to friends or family members.
- Improved financial performance. An obvious financial benefit of retaining customers is reduced revenue acquisition costs, but customer engagement goes much further for all kinds of businesses.
A 2014 study by Watermark Consulting shows that Customer Experience Leaders outperformed the S&P 500 in cumulative total return by 26 points. Customer Experience Laggards posted a 2.5% negative return from 2007-2013, according to the Watermark study. Moreover, Watermark found a link between the customer and employee experience at the businesses it studied. Engaged, happy employees help to create loyal customers, who in turn help keep employees engaged and happy, Watermark found. The “virtuous cycle” of having engaged employees and customers generates enormous financial benefits — for all kinds of organizations.
Customer engagement, reinforced by repeated positive experiences, can build a strong foundation for sustained growth. In my next post, I’ll discuss how businesses can create more positive customer experiences.