Customer experience impacts retention: Here’s how
Remember that old English proverb, “A bird in hand is worth two in the bush”? There’s a wealth of wisdom in the saying. In business terms, holding on to your existing customers (pampering them, even) pays off in more ways than you’d imagine. And customer experience is what drives the rate at which you retain them — or not.
Sales teams, driven by the need to increase revenue, tend to focus on ways to constantly expand their customer base. In the process, they may end up paying less attention towards retaining their existing customers. But new is not necessarily better, as many studies reveal. For instance, the rate of sales to new customers is a mere 5-20 per cent while the success rate of selling to established customers is 60-70 per cent. Also, while customer acquisition cost is 5-25 times higher than retention, a tiny increase of 5 percent in customer retention drives up profitability by — hold your breath — a whopping 75 per cent.
So what does it take to hold on to your faithfuls? Quite simply, not taking your eye off customer experience. A diligently sustained customer experience and retention strategy pays off in multiple ways. Customer surveys show that:
- Loyal customers make repeat purchases.
- Old customers who trust your brand are more willing to try a new product and pay about 30 per cent more for it than new customers.
- High quality products and effective after sales service means that customers are less likely to explore competing brands.
- Happy customers are more likely to refer your company to others.
- They will continue to renew subscriptions.
One good thing feeds into another. Paying attention to customer experience translates into more sales, an assured revenue stream and a higher Customer Lifetime Value (CLV). Also, the stronger customer loyalty is, the higher your retention rate and hence, the more your brand growth.
Here’s a closer look at how a strong customer experience and retention strategy go hand in hand, deliver great returns and generate more business, often at no cost:
Good reviews and recommendations from existing customers reinforce your credibility as the go-to brand in the industry for solutions and differentiate you from the competition. Your brand becomes the gold standard that customers check out for solutions — even if they have never purchased your products.
Enhances online presence
When satisfied customers post reviews and mentions, your brand’s online presence grows; search engines and review websites give your brand more prominence making it easier for more customers to find you. Loyal customers who tag your business or talk about the brand on social media also reach their followers who are potentially fresh customers from the same target audience.
Raises the bar for industry
High-level customer experience from one brand forces others in the same industry to play catch up, thereby raising overall standards in the sector and increasing all round expectations from customers.
Why customers leave
Why do customers walk away or move to competing brands? For the same reason they stay — customer experience, only this time around, a negative one. One study highlights three broad reasons that lead to customer churn:
Topping the list of customers who switch are those who feel they have been treated unfairly; they would prefer to stick to a familiar brand but only if only they perceive that they are being treated well.
Pricing is the primary factor that impacts customer churn. But again, if customers feel cared for, many will remain loyal. However, when a competitor offers a superior experience, along with a lower price, customers are more likely to switch brands.
When customers encounter a problem, their first choice typically is to get it resolved by talking to a person. FAQs on a website and clever chatbots can sort out many concerns but cannot entirely replace human intervention. When a brand fails to adequately address unique customer needs, this leads to a feeling of being neglected and being given solutions that do not work well.
Customers who perceive your brand in a positive light are your best ambassadors. To make that happen, it is essential to focus sharply on their experience, and keep them coming back for more. There are several aspects to accomplishing this — using appropriate technology, employing dedicated people, gathering insights into customer behaviour and crafting strategy. Using all of these elements is essential to delivering a memorable experience and importantly, building a strong relationship with your customer base.
*For organizations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organizational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organizations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organizations that are innovating collaboratively for the future.