What Customer Service Means to Your Bottom Line

WHAT CUSTOMER SERVICE MEANS TO YOUR BOTTOM LINE
 

Even though we have been dating for the past few years, my fiancé has finally decided to open up about some of my behaviors she doesn’t understand. For instance, why do I drive across town to get coffee when there is a shop just around the corner from my house? Is there a reason I always stay at the same hotel chain when traveling? And what about those flights? Do I not realize there is more than one airline to choose from in this country?
When she pointed these things out to me, I had to take a step back and think about it for a second. Why do I do all of these things? Why do I feel guilty, almost as if I’m cheating on these brands, for going to a competitor? Well, it all boils down to the experience I get from those brands.

I drive across town for my latte because they always make it the way I like it, and the baristas know me on a first-name basis. I stay at the same hotel every time because, regardless of where I am, the concierge service there always gives me the run down on the best hot spots in town. And, I use the same airline time and time again because they helped me get home for Christmas after I missed my connecting flight.

These brands consistently provide me with the most positive customer experiences. That goes a long way in my mind. This type of intangible performance measure is very subjective. It is difficult to quantify, especially when compared to more tangible measures like sales and margin. So the question still remains, how much does the customer experience really affect the bottom line?

Forester Research Inc., a leading global research and advisory firm, uses a role-based approach to providing proprietary research plus consumer and business data to help organizations understand, strategize and act upon opportunities brought by change. In a 2012 study for customer experience professional roles, Forester used their Customer Experience Index rating (CXi) to analyze the business impact of customer experience and quantify the potential revenue associated with positive customer experience. Brand CXi scores were determined from surveying 7,938 U.S. consumers on their interaction with brands in a variety of industries. Using the CXi scores rating, companies were segmented into two groups: Customer experience leaders (those who scored at or above the industry average on the CXi) and customer experience laggers (those who scored below the industry average). Forester’s findings indicated a strong correlation exists between customer experience and customer brand loyalty. According to Forrester, brand loyalty is defined as the willingness to make another purchase, likelihood to switch to a competitor and likelihood to recommend the brand to a friend or colleague. Companies with higher CXi scores tend to have more customers who will buy from them again, won’t leave to use a competitor and will recommend the brand to a friend or colleague. Moving from a lower CXi score to an above average CXi means:

• More incremental purchase from existing customers

• Retained revenue by lower customer churn

• New sales driven by word of mouth


According to the Forester potential revenue model, brands moving to a high CXi score compared to a low CXi score can see millions, possibly billions in new revenue generated by improving customer experience. Simply stated, this could mean revenue increase potential anywhere from $32 million for retailers, $590 million for airlines and up to $1.2 billion for hotels. In today’s competitive market, those are astounding figures companies can’t afford to ignore.
Ultimately, the Forester research quantifies what a brand manager already understands; customers are more loyal to brands that treat them well. So how does a company go about increasing their CXi score and generating a strong brand affinity? It starts by looking inward.

Branding is all about generating a strong affinity towards an organization that keeps the customer coming back again and again. For most customer experiences, the real point of contact is made through employee interaction of some sort, through a sales associate, customer service rep, online shopping support, etc. Engaged employees are at the core of quality customer experiences. Companies must align their employees’ behavior and attitudes with their brand promises and values so they can provide exceptional experiences.

The key is to establish a clear and simple process that guides employees towards internalizing values that evoke changed behavior. Inward refers to this process as internal dialogue communication. It starts by engaging in experiential communication to inform employees about brand values and culture. Then it uses open and honest dialogue through facilitated workshops and trainings to help employees understand brand values and culture so they can internalize it personally. Through peer-to-peer communication, culturally aligned appraisal systems, friendly competition and brand ambassador programs employees unify and become committed enough to change their personal behavior and attitudes. Finally, the company must recognize employees for embracing new behaviors in a relevant and timely manner.

Research shows employees who feel appreciated and empowered are going to deliver a much better customer experience. Competitors can copy a lot from successful brands: products, website layouts and services offered. But a brand with a unified, customer-focused culture is much more difficult to replicate. And, at the end of the day, that is truly the competitive advantage – one that could mean billions in loyalty-based revenue for your company, according to Forester.