This summer, I biked along a small section of the Great Allegheny passage on a beautiful day. The sun was out, it was a cloudless day, a light breeze was coming off of the river, and the wind was at my back, making it an enjoyable ride. However, on the way back, I found myself pedaling into a fairly strong headwind. The grade was still the same, and the journey hadn't changed, but covering that same distance riding into a headwind took significantly more effort.
I recently had a conversation about the impact of customer experience with Jessica Noble, senior manager of enterprise consulting at Tribridge. As we discussed applying analytics to the factors that influence customer experience and the impact on a company, I thought about that strenuous return ride. The ride out and the ride back were a part of the same journey, but two remarkably different experiences based on how much headwind there was. The same can apply to organizations, where the "headwind" to their growth can be evaluated in terms of customer experience.
Why Focus on Customer Experience?
In her recent blog, Jessica defines the customer experience as your customer's perception of their interaction with or about your brand and all their touch points across your company.
If any aspect of your company is delivering a poor customer experience, you risk undermining the great experience provided elsewhere, and losing valuable customers.
Let's say that a company is expected to grow its revenue by 20% year over year. It's an aggressive but achievable goal. To accomplish this, they either need to:
- Sell more products and services to existing customers
- Attract new customers to purchase existing products and services
- Develop new product or service revenue streams
- A combination of the above
No matter how you slice it – it will be a lot of work and determination to increase revenues by 20% year over year.
The Impact of Poor Customer Experience
Depending on your industry, a typical company loses anywhere between 10%-25% of its customers every year, whether to the competition, to another product or service line, or because of a lack of appetite to purchase. This might be due to a change in the market and product obsolescence, or a change in the economy. This may also be due to a poor customer experience, with increasingly dissatisfied customers "firing" their vendors and taking their business elsewhere.
If the company in my example is losing 20% of its customers each year, its already aggressive goal to grow revenue by 20% is now compounded. Not only does it need to increase its revenues by 20%, it also has to generate an additional 10-20% in revenue to replace the lost customers. The initial expectation of a 20% growth rate, which seemed aggressive but achievable, now becomes 35%-40%--a much less likely target for the company to achieve. And, left unchecked, these numbers compound. As more customers leave year over year, the company is falling farther and farther behind its long-term growth targets, which can feel like a pretty strong headwind.
The Analytics of Customer Experience
To reduce this headwind, you need to quantify effects of customer experience with analytics, and determine the leading indicators for potential customer turnover. Fortunately, most companies are already sitting on a gold mine of data that can provide this insight, in terms of their CRM systems, which track contacts, interactions and opportunities; and their ERP systems, which track sales, detailed orders, patterns and associated financials, along with revenue.
A few of these data points might include but are not limited to:
- Size, frequency, and number of purchases by customer, correlated to the change in time between purchases and the change in size or complexity of purchase
- Product fulfillment, product returns and SLA metrics
- Number of new customers being added, correlated to changes in revenue as well as number of existing customers who have not purchased within a predefined timeframe (based on industry)
- Number, type, frequency and sentiment of customer interactions across all channels, including customer feedback related to satisfaction and effort required to do business with a company
- Changes in customer demographics and segmentation over time
- Number and distribution of interactions required prior to purchase, along with post-purchase interactions
Each of these data points are valuable and can paint a picture of customer experience trends, if integrated into an actionable dashboard, and analyzed over time for trends and root causes. This can help a company determine how much customer loss may impact their revenue growth, and how much "headwind" they are likely to face.
To discuss more about applying analytics to your business, or to understand the impact of customer experience and how to improve this, please contact us.