50 Facts About Customer Experience is an article by James Digby. As the title suggests, it lists fifty findings Digby collected from reports by many different sources such as consulting firms (McKinsey, Bain), research firms (Gartner, Forrester) and even the White House Office of Consumer Affairs. We find that even though the article was written nearly three years ago, the facts that it lays out lead to insights that are arguably universal and still valid today.
After reading all fifty facts, it is almost impossible to miss the common trends that emerge. None of these trends should come as a surprise to anyone, but nonetheless it is powerful to see facts from different sources point to the same outcome.
The most powerful message of the facts is the importance of customer retention. Companies are always chasing after new customers, but often times neglect existing customers while doing so. It is critical to establish the correct balance between “hunting” new customers and “farming” existing ones. Here are some facts that underline the importance of “farming”:
- It costs 6 – 7 times more to acquire a new customer than retain an existing one. (Bain & Company)
- The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20%. (Marketing Metrics)
- A 2% increase in customer retention has the same effect as decreasing costs by 10%. (Leading on the Edge of Chaos, Emmett Murphy & Mark Murphy)
- Research shows that a 10% increase in customer retention levels result in a 30% increase in the value of the company. (Bain & Company)
- Customer profitability tends to increase over the life of a retained customer. (Leading on the Edge of Chaos, Emmett Murphy & Mark Murphy)
It is clear that customer retention is important for profitability, both from a cost and a revenue perspective. If we can see that by simply looking at a few facts, then surely the managers of companies who deal with customers every day also realize its importance:
- 85% of business leaders agree that traditional differentiators alone are no longer a sustainable business strategy. (Shaw & Ivens)
- 73% of marketing managers of various large companies credit “repeat purchase behavior” as integral to the definition of successful customer engagement. (Forbes Magazine)
- 71% of business leaders believe that customer experience is the next corporate battleground. (Shaw & Ivens)
It seems that most managers hold customer experience and retention in very high regard. They are talking the talk, but are they walking the walk?
- A survey asking which is the most important marketing objectives, shows that 29.9% think that it should be customer acquisition, and 26.6% think that it is customer retention. However 62.2% admit that they concentrate on customer acquisition, with only 20.6% focusing on customer acquisition. (eMarketer)
- 55% of current marketing spend is on new customer acquisition, 33% on brand awareness and only 12% on customer retention. (McKinsey)
- 92% of all customer interactions happen via the phone. (Gartner)
- 85% of consumers are dissatisfied with their phone experience. (Gartner)
- 68% of customers leave because they were upset with the treatment they received whilst speaking to customer services. (US Chamber of Commerce)
It appears that customer retention is not getting the attention it deserves, because not only does marketing consider existing customers to be less important than new ones, but the customers are also getting bad customer service, especially from call centers!
We will not go into the details of why that is the case here. It is no secret that in most organizations the sales function is considered to be the “superstar”, while customer service function is more like the “ugly child to be kept in the back room.” Why that is the case and at what point companies decided that selling is more important than serving is not important. What is important here is that most customers are simply not happy, and most companies do not find out about it until it is too late:
- 72% of all customers believe it takes too long to reach a live agent. (Harris)
- 50% of the people survey said that agents failed to answer their questions. (Harris)
- 44% said the information they received was not accurate. (Harris)
- For every customer complaint, there are 26 other unhappy customers who have remained silent. (Lee Resource)
- 96% of unhappy customers don’t complain, however 91% of those will simply leave and never come back. (1st Financial Training Services)
To summarize, Digby’s facts give us the following:
- Customer retention is extremely important for profitability.
- Executives are aware of this fact, but most are not doing what is necessary.
- To increase retention, both marketing spend towards existing customers and service quality need to be improved.
- A customer retention strategy targeting the right cost/benefit ratio for the company must be adopted by all parts of the organization.
Let us conclude with a quote from poet Maya Angelou, and remember: Customers are people, too!
People will forget what you said.
People will forget what you did.
But people will never forget how you made them feel.