Over the last several years, customer experience has become a buzzword in companies around the globe. But why should marketers care about customer experience? Why do customers’ thoughts and feelings about their interactions with companies matter?
One word: loyalty.
According to a recent report from Oracle:
- 81% of consumers will pay more in exchange for a great customer experience — and nearly half (44%) are willing to pay a premium of more than 5%.
- 70% have stopped buying from a company after a bad customer experience.
- 64% have taken their business to a company’s competitors after a bad customer experience.
USAA, a financial services firm that caters to military personnel and their families, is a great example of these statistics in action. USAA ranked at the top of Forrester Research’s 2014 Customer Experience Index in not one, not two, but three separate categories: banks, credit card providers, and insurance providers. These rankings are calculated from customers’ feedback about their personal interactions with companies — which means that USAA’s customers think that it provides a great experience. USAA has racked up an entire wall of similar accolades, which have come as the result of a fanatical focus on its customers and decades of hard work. And the payoff is an incredible 98% customer retention rate.
Of course, marketers shouldn’t just assume that better customer experiences create loyalty within their customer base. They need to measure it.
Net Promoter Score is one of today’s most popular loyalty measurement frameworks. It revolves around one simple question: How likely is it that you would recommend our company to a friend or colleague? The score is calculated by subtracting the percentage of “detractors” (those who answered 0 – 6 on an 11-point scale) from the percentage of “promoters” (those who answered 9 – 10). NPS® is a great metric in that it provides one single number for an entire company to rally around.
But what customers say they’ll do is, of course, just half the story. Ask just about anyone in a focus group if they try to eat healthy, and you’ll get a roomful of nodding heads. Visit those same customers in their homes, and you’re likely to find pantries full of chips and cookies and freezers full of ice cream and boxed pizza.
The same thing goes for measuring loyalty. While we shouldn’t completely disregard what customers say they’ll do in the future, we’ll get a much more accurate picture if we can nail down their actual behaviors. A hotel chain, for example, should look at actual purchase behavior — are customers staying more frequently, less frequently, or about the same? Are they trying out other hotel brands in the same group? Furthermore, can you correlate these behaviors with the frequency of customer service issues or with feedback from surveys about customers’ recent stays?
Companies that don’t have the internal systems to track and correlate actual customer behavior to this degree shouldn’t throw in the towel. A survey-based approach can still yield valuable insights. Just simply shift the question from “Will you recommend our company to a friend or colleague?” to something like “Have you recommended our company to a friend or colleague in the past three months?”.