Customer experience determines the reputation a business has with its customers.
Businesses experience a spectrum of customer interactions, from great to bad, each impacting operations and profitability:
Great customer experiences contribute to exponential growth for businesses. Companies that consistently offer superior experiences often see a boost in customer loyalty and word-of-mouth marketing, leading to increased sales and market share.
Okay experiences challenge customer retention but still leave room for businesses to improve and persuade customers to continue their relationship. These experiences require targeted efforts to upgrade customer interactions and ensure repeat business.
Bad experiences have the potential to severely damage a business’s reputation, leading to customer churn and negative publicity. Negative experiences often result in lost sales and can increase the cost of marketing and customer acquisition due to the need for reputation repair and increased efforts to regain customer trust.
Complexity compared to other strategies
Marketing strategies like advertising campaigns are direct and measurable, but customer experience involves complex, interconnected elements that are less tangible. For example, understanding and meeting customer expectations requires continuous feedback and adaptation.
A superior customer experience might include complimentary products, high-quality content, or personalized coaching. Each element works to meet and exceed customer expectations, fostering loyalty and encouraging positive feedback and referrals.
The customer experience is every interaction between a customer and a brand, including digital communications such as transaction emails, delivery status updates, and invitations to provide feedback. Delivering beyond expectations in these communications can create memorable experiences that solidify the bond between customers and the brand.
MUD\WTR™ has improved customer experience by including unexpected bonuses like stickers and a recipe pamphlet in their packages. These small surprises delight customers, leading to positive reviews and increased customer engagement.
Why organizations prioritize customer experience
Companies that make customer experience a priority have a competitive edge, particularly in markets where products and prices are similar. Superior customer experience attracts and retains customers more effectively than price cuts or marketing spending alone.
Google recognizes the importance of customer experience and incorporates it into its search algorithms. A positive customer experience improves search rankings, making SEO strategies more effective by aligning them with user satisfaction metrics.
Financial benefits
Investing in customer experience proves more cost-effective than focusing solely on new customer acquisition. Existing customers who have positive experiences are more likely to buy again and recommend the brand to others, reducing the need for extensive marketing.
Customers who become brand advocates based on their experiences contribute to a lower overall cost of sales and higher profitability. They help spread positive word of mouth, which is often more persuasive than traditional advertising.
Customer Lifetime Value (CLV)
Improving customer experience has a direct, positive impact on Customer Lifetime Value (CLV), a key metric that measures the total revenue a business can expect from a single customer over the life of their relationship.
Businesses calculate CLV by multiplying the Average Order Value (AOV) by the Average Purchase Frequency (APF). This metric helps businesses understand the long-term value of enhancing customer interactions. Focusing on CLV improvement is often more productive and less challenging than attempting to double conversion rates through marketing alone.
Businesses can increase CLV by offering product bundles or introducing high-ticket items that increase the average expenditure per purchase. These strategies improve revenue without the added cost of acquiring new customers, making them an intelligent approach to business growth.
Strategic insights
Marketing strategies must continue and intensify after a purchase to transform customers into loyal fans. Engaging customers post-purchase through personalized follow-ups, exclusive offers, and meaningful interactions strengthens their connection to the brand and encourages repeat business.
Focusing on existing customers often yields higher returns than allocating resources primarily to new customer acquisition. Data shows that the probability of selling to an existing customer ranges from 60-70%, while the probability of selling to a new prospect is only 5-20%. Prioritizing existing customers also reduces costs — acquiring a new customer is five to 25 times more expensive than retaining an existing one.
Businesses find doubling the average cart value simpler than doubling conversion rates. Introducing strategies like product bundling, upselling, and cross-selling can increase the average spend per transaction without the steep costs associated with increasing the customer base.
Companies must focus on creating experiences that transform customers into enthusiastic brand advocates. Engaged customers who share their positive experiences with others do more than provide free marketing; they build brand trust and can influence others more effectively than traditional advertising.
Concluding thoughts
Customer experience directly influences how customers perceive and feel about a brand. A consistent and positive customer experience builds a strong brand reputation, which is essential for long-term success.
Making customer experience a priority results in happier customers, which leads to improved search engine rankings and better financial outcomes. Satisfied customers are more likely to leave positive reviews and engage with the brand, both of which contribute to higher organic search rankings.
Positive customer experiences correlate with increased purchase frequency and higher customer satisfaction. A study shows that improving customer experience can lead to a 10-15% increase in revenue and a 20% increase in customer satisfaction. Moreover, customers with great experiences spend 140% more compared to those who have poor experiences.
