The REAL Cost of Customer Experience


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Cost is, quite rightly, a focus for all organisations. Every company has a limit to it’s resources, some higher than others, but waste is always unforgiveable. The best organisations are lean, consistent and focused on delivering their vision.

However, a keen awareness of cost proves to be confusing for a lot of leaders. As I have written before, leaders are very number aware but they don’t always see cost in the full strategic context of their business. This can, undoubtedly, lead to some very odd behaviour.

Because leaders are smart people, logical and focussed on results, they see customer experience as a key competitive strategy. And why wouldn’t they? In a study, undertaken over 8 years, it has been shown that the companies recognised to give the best customer experience had total shareholder returns that were 48% higher than those with an average customer experience.

And that is why 89% of companies expect to be primarily on the basis of customer experience in 2016. A very smart strategic direction. But what are they actually doing to be competitive on customer strategy? Beyond a lauded statement that they are customer centric, it turns out that most companies are doing precious little.

Will that be enough? No. Not at all. Talk is cheap and modern customers are too smart to be fooled.

At the heart of the leader’s dilemma is short-term thinking. Because leaders are under incredible pressure to deliver short-term targets they see customer experience as a cost, rather than an investment. That will hurt them.

Whatever leaders are prioritising their spend on they had better hope it gives a huge competitive advantage. Low price? Product? Technology? Advertising? So many competing priorities.

If there is a profit to be made in a sector then we can be absolutely certain that someone new will come along to take their piece of it. They will come with a fresh outlook. They will come without a legacy cost base. They will come free from the olde worlde thinking of your sector. They will just be sexier.

They will come cheaper, leaner, more refined, smarter or maybe they will just have a snazzier app. Disruption is here already. The old big dogs no longer have a monopoly over their existing customer base. Amazon is killing the bookshop. Uber is transforming the taxi cab market. Search engines are leaving travel agents irrelevant.

The costs of failing to invest in customer experience are here already too but are often overlooked in the analysis as they are just “the way we do things around here”. It is estimated that companies spend 10% of their revenue on marketing. Of this a large proportion will be on retention costs – spend to either stop a customer from moving away or to win them back after they have been lost; another chunk will be on acquisition – getting new customers, often re-filling the pipeline of lost customers. The remainder will be on brand building – but, without a great customer experience to underpin this investment, it is like building a house on a foundation of sand.

If customers feel frustrated, undervalued, or let down they will switch to another supplier. If they ask their friends or search online and hear bad feedback you won’t even make it onto their shopping short-list. There are plenty of statistics to support this. Customers are becoming more discerning, more likely to switch and they are becoming noisier in their feedback to the companies they deal with. So, what can make a difference?

Yes, the last sustainable competitive advantage is customer experience. If a customer is emotionally attached to a product or service then they will be less likely to churn. If a company demonstrates that it cares by respecting it’s customers and makes it easy to buy from them it will find loyalty where before there was none.

Those leaders that look at the investment required for customer experience as a cost are sleepwalking towards a precipice. The “invisible” costs of poor customer experience are already being borne and they are significant. If that was not bad enough those leaders, in their short-sightedness, are already choosing to forego the benefits of a great customer experience – higher spend, cross selling, upselling and customer advocacy.

We live in crazy times for business. Short-term thinking simply makes that more volatile. Let’s look after our customers ourselves before someone else does it for us!

Dougie Cameron
Having worked in major blue chip organisations in both senior finance and customer service roles Dougie is described as a strategist, planner and implementer. In his own words he describes himself as "a reformed financier on the road to enlightenment". But most of all he is just plain frustrated by poor leadership and bad customer experiences. Dougie founded addzest consulting to help companies find their way to engage their teams to give customers better.


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