Customer Experience Leaders Break Out of Boom and Bust Cycle

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The economy is down. Way down. The overall mood in businesses is down as well. No one knows when things will turn around. A sense of paralyzing helplessness seems to be spreading throughout the corporate world. Budgets are being cut and people made redundant. Lean is king. Sound familiar? Believe it or not, not to everyone!

Every year Strativity Group conducts a Customer Experience Management (CEM) Benchmark Study among executives worldwide. This year, the study’s 869 respondents reflected the state of affairs in their organizations in light of the economic difficulties and the uncertainty enveloping us all. While the majority was, as expected, withdrawing or reducing overall investments and their commitment to customers, a surprising select group of organizations decided to play a different game.

According to 80 percent of executives surveyed in the 2009 CEM Benchmark Study, half reported that their companies invest less than two percent of revenues on customer experience. In addition, over 50 percent stated that investments in customer experience have remained flat or declined over the past three years.

Customer experience leaders

In striking contrast, some companies are bucking this trend even during the current economic downturn. Of the executives surveyed, 21 percent reported that their companies invested 10 percent or more of their revenue on customer experience. Furthermore, 48 percent of the executives reported that their companies have increased investments in customer experience over the past three years by 10 percent or more (17 percent reported increasing investments by 20 percent or more during this time period).

Those companies which increased their investments represent a new trend. Instead of succumbing to the traditional boom and bust cycle in customer relationships, they elected to go for a long term customer relationship instead.

Traditionally, during good times, companies increase their investments in customer strategies and indicate interest in building a sustainable delightful customer experiences. However, as soon as the economy gets bad, the customer sees a different approach. Services and quality are cut to the bone and customers are left with a sense of deception and betrayal as they watch their vendors turn their backs to them.As the economy slowly recovers, companies once again court their customers with increased investments in order to regain the customer’s love and wallet.

This boom bust cycle has characterized the customer relationship cyclicality for many years. Over time, customers developed an immunity to this cycle and became cynical when companies courted them and increased investments. Customers know that the relationship is conditional and will most likely change as soon as the company decides that there is a reason to do so. As such, investments in customer relationship and loyalty programs become increasingly expensive as customers demand more proof of a company’s sincerity and true interest.

Breaking out of boom and bust cycle

The study results demonstrate that select companies identified the cost and revenue losses associated with this boom and bust customer relationship cycle and have decided to change the rules. Not only do they maintain their ongoing investment, but have actually increased it. This select group of smart companies has realized that in this economy, when everyone else is decreasing their attention and investment in customers, it is actually the best time for them to shine and demonstrate their sincere interest in their customers.

By increasing their investment in customer strategies, these companies pass a very important test in their relationship with their customers. They demonstrate that even in tough times they are here to stay! In this environment, their commitment shines through loud and clear. They create a clear awareness of their commitment to customers at a time when their competitors remain silent.

Is this investment worth it? Will it have a long-term benefit and payoff? The study results demonstrate that the approach of bucking the boom and bust cycle pays off now as well as in the long term.

The study indicates that in contrast with their counterparts that invest less than 2 percent of their revenues in customer experience, companies that invest 10 percent or more of their revenue in that area:

  • Have significantly lower customer attrition rates
  • Enjoy referral rates that are twice as high as their counterparts—81 percent or more

Similarly, companies that have increased their investment in customer experience over the past three years report higher satisfaction and lower attrition results than those that have decreased their investments during the same period. Specifically, companies that have increased their investment:

  • Report satisfaction scores that are 60 percent higher
  • Are 30 percent more likely to have attrition rates of 5 percent or less

In short these companies enjoy the benefit of running a more profitable business. They reduce their cost of service by enjoying higher satisfaction rates and fewer complaints. They enjoy a greater percentage of repeat business which lowers sales costs. They also benefit from a lower cost of new sales, as a greater portion of their business comes from referrals.

Investing for the long run

In tough economic times, it is easy to fall into the traditional behavior traps. But experience has demonstrated that often short term cost cutting efforts come with a hefty survival cost in the long run. Customer loyalty, as select companies have now discovered, is not subject to the boom and bust cycle. Relationships need to be invested in for the long term. It is inspiring to see that some companies are learning from recent history and refuse to repeat the tempting mistakes of the past. They are charting a new course of doing business with customers. They are not abandoning their customers at the time when their customers need them the most. These companies are reaping the financial benefits of this new strategy.

The annual Customer Experience Management Benchmark Study examines the behavior of companies across the complete customer experience strategy cycle—from customer demands, investment, resources and focus, organizational readiness, economics of customer experience and customer dialogue. For a complimentary copy of the Executive Summary of the study visit www.Strativity.com.

Lior Arussy
One of the world’s authorities on customer experience, customer centricity, and transformation, Lior Arussy delivers results. His strategic framework converts organizations from product- to customer-centricity. It is drawn from his work with some of the world’s leading brands: Mercedes-Benz, Royal Caribbean, Delta Air Lines, MasterCard, Novo Nordisk, Walmart and more.Arussy is also the author of seven books, including Next Is Now (May 2018)

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