We are currently in a period dubbed by Forrester as “the age of the consumer,” a 20 year business cycle in which “the most successful enterprises will be those that reinvent themselves to systematically serve and understand increasingly powerful customers.”
“The reason you should care about this is because, in the age of the customer, you can’t control the flow of information,” Forrester analyst Harley Manning explained at Autotask Community Live in Miami last month. “You can’t counter social media with marketing, you can’t slow the rate of technology change and you can’t stem the rising expectations that come with the technology changing.”
In the past, businesses used to hold the bulk of the power, as they controlled what customers knew about their products and were pretty much free to work the pricing as they saw fit. But, “technology changed all that,” handing power over to consumers who can now easily compare prices and often know as much about a business’s products and services as they do.
So, consumers may hold more power than ever before, but what does this mean for businesses when it comes to customer experience (CX)? According to Manning, it means a lot: “Customer experience leaders grow revenue faster than CX laggards, they drive more purchase intent, they earn greater pricing power, they lower their service costs - which increases profitability - and they reduce regulatory compliance risks.”
To prove this, Forrester carried out a study comparing the differences between customer experience ‘leaders’ and ‘laggards’ in a range of different industries between 2010 and 2015. This included:
- Cable industry: The CX leader experienced significantly greater revenue growth (29.4 per cent compared to 4.5 per cent for the CX laggard) and obtained significantly more internet subscribers - up 30.4 per cent compared to 6.5 per cent.
- Airline industry: The CX leader experienced increased domestic and global revenue (6.9 per cent and 7.3 per cent respectively) compared to just 0.3 per cent and 2.2 per cent improvements for the CX laggard.
- Financial services: Revenue grew by 10 per cent for the CX leader compared to just 3.8 per cent for the laggard.
Manning identified three primary factors that explain these findings. Firstly, “customer experience drives customer loyalty,” in which there are three types; retention loyalty (i.e. staying with a company), enrichment loyalty (spending more) and advocacy loyalty (being willing to recommend).
Secondly, “customer experience can drive willingness to pay a price premium.” Essentially, as the CX gets better, the number of customers willing to pay more for your products and services increases, which is a big deal for any business. And thirdly, “providing an excellent customer experience transfers into margin” by giving business pricing power, retaining customers for longer and reducing services costs.
An excellent example of the power of CX is Cisco, which created a ‘voice of the customer’ program a few years ago to collect feedback from customers. Through this feedback, Cisco fixed access and navigation issues on its support website. Now, 81 per cent of technical support issues are resolved online, “which made the customers happier and saved Cisco a whole load of money” - around $750 million annually.
Clearly, customer experience can be a key driver of business success in this digital age. By putting customers at the centre of everything they do, businesses can ensure they never become a laggard and reap the rewards of leading the pack.
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