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The ROI of Customer Experience: Who Cares?

What’s the ROI of customer experience? I get asked that question all the time. People want numbers to justify everything. And it seems as though they want to see even more data before investing in things that they don’t want to do.

Asking about the ROI of customer experience is a somewhat silly question. It’s like asking what’s the ROI of software for Saleforce.com, the Web for Amazon, cars for General Motors, or tractors for John Deere? Customer experience is an integral component of every organization that has customers (i.e. all of them). Think of it this way: What would happen to your company if you just stopped interacting with your customers?

Every organization already invests in customer experience. And unless that company goes out of business, it will continue to do so.

Although it sounds like I’m anti-ROI, that’s not the case at all. It’s critical for companies to understand the link between customer experience and business results. With this information they can make informed decisions about how much incremental money, time, and effort they want to spend on making changes.

Organizations can only focus on making dramatic improvements in a few areas at a time. Should customer experience be one of those areas? If you believe that it will help your company achieve its broader objectives better than other investments, then the answer should be yes

That’s why Temkin Group published the report, “ROI of Customer Experience, 2014.” Our research examines how an improvement in customer experience will increase customer loyalty across 19 industries. The study examines feedback from 10,000 U.S. consumers.

As you can see in the graphic below, companies with excellent customer experiences have significantly higher loyalty than other companies with poor customer experience.

A modest increase in customer experience at a typical $1 billion company can earn an additional $272 million to 462 million in revenues over three years, according to the research. Hotels, fast food chains, and retailers have the most to gain. Here are some other highlights from the research:

  • Examining the loyalty and repurchase plans for customers of 268 companies reveals a very high Pearson Correlation coefficient of 0.83.
  • Net Promoter Scores of companies with very good customer experience ratings average 22 points higher than the scores of companies with poor customer experiences, with a very high Pearson Correlation coefficient of 0.77.
  • Across all 19 industries, loyalty is highly correlated to the three components of the Temkin Experience Ratings: functional, accessible, and emotional. In almost all cases, the emotional element of experience has the highest correlation.
  • Auto dealers retain the most business from existing customers ($184 million over three years) when they improve customer experience, whereas investment firms retain the least business ($94 million over three years).
  • Supermarkets, fast-food chains, hotels, and retailers generate more than $100 million in additional revenues over three years through word of mouth as a result of improved customer experiences.

So, what’s the ROI of customer experience? Who cares?!? What you should ask is the following: What’s the ROI of improving customer experience? For many organizations the answer includes customers who will buy more from you, forgive you for mistakes, try your new offerings, and recommend your company to others.

The bottom line: Improving customer experience will boost loyalty.

  Bruce Temkin, managing partner and customer experience transformist at Temkin Group, a customer experience research and consulting company. He is widely viewed as a leading expert in customer experience.
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